Senior traders at Royal Bank of Scotland boasted about operating a “cartel” that made “amazing” amounts of money by rigging interest rates, it has been disclosed.
Internal messages revealed in court documents apparently show how traders claimed they could manipulate Libor, which is used to set borrowing costs for millions of businesses, consumers and investors.
The messages, some sent just months before the taxpayer was forced to bail out RBS at a cost of more than £40bn, suggest the practice was condoned and encouraged by senior executives at the bank, and have now dragged the taxpayer-backed lender to the heart of the Libor scandal.
MPs have warned that the scale of RBS’s involvement in the scandal means it could face an even bigger fine than Barclays, which paid a record £290m in July after admitting attempting to manipulate Libor. The bank could also be hit with billions of pounds in damages claims.
Tan Chi Min, a former senior trader at RBS’s global banking and markets division in Singapore, has alleged that managers “condoned collusion” between staff to maximise profits by rigging Libor.
Mr Tan, who worked for RBS from August 2006 to November 2011, was eventually sacked for gross misconduct, but claims the bank made him a “scapegoat” for malpractice condoned by managers.
A 231-page affidavit filed by Mr Tan at the Singapore High Court, obtained by Bloomberg, includes alleged transcripts of instant messages from RBS traders and executives.
On August 19, 2007, Mr Tan sent a trader based at Deutsche Bank a message. “It’s just amazing how Libor-fixing can make you that much money or lose it if opposite,” he wrote. “It is a cartel now in London.”
A day later Mr Tan sent a message to Scott Nygaard, global head of RBS’s London treasury markets. “We want high fix in 3s [a reference to three-month interbank lending],” Mr Tan wrote. “Neil is the one setting the yen Libor in London now and for this week and the next.” Mr Nygaard replied: “Go Neil, hahahahaha.”
On August 21, 2007, Jerzi Mohideen, another senior banker working for RBS in Singapore, wrote: “What’s the call on Libor?”
Neil Danziger, a trader who has since been sacked by RBS, allegedly sent a message asking: “Where would you like it, Libor that is?”
Another trader wrote: “Mixed feelings, but mostly I’d like it lower so the world starts to make a little sense.” Mr Danziger replied: “OK, I will move the curve down 1 basis point, maybe more if I can.”
Mr Danziger declined to comment.
On April 2, 2008, Mr Tan said: “Nice Libor, our six-month fixing moved the entire fixing, hahahah.”
The Serious Fraud Office is considering whether to bring criminal proceedings against individuals found to be involved, while regulators in the UK and US are also conducting investigations. This week, Stephen Hester, chief executive of RBS, who joined the bank in October 2008 following its bail-out, said he expected the fines and legal claims related to scandals such as Libor to cost the bank “a lot of money”.
A spokesman for RBS said: “Our investigations into submissions, communications and procedures relating to the setting of Libor and other interest rates are ongoing. RBS and its employees continue to cooperate fully with regulators.”
Mr Nybaarg and Mr Mohideen, who are both still employed by RBS, declined to comment.
RBS is among several of the world’s biggest banks being investigated over their role in fixing the rate, known as Libor. The issue has prompted renewed calls for an overhaul of the banks.
Martin Wheatley, head of financial conduct at the Financial Services Authority, will on Friday publish his proposals on ways to reform Libor to prevent it from being manipulated. Mr Wheatley is expected to recommend that responsibility for Libor is taken away from the British Bankers’ Association, which has seen its role in the oversight of the rate heavily criticised.
John Mann, a Labour MP on the Treasury Select Committee, said: “The situation at RBS was even worse than Barclays. This is potentially significant criminal activity and there needs to be a full police investigation.”