LIBOR Scandal Grows

(Posted on 27/10/12)

In yet another revelation in the ongoing Libor scandal, Royal Bank of Scotland announced it had suspended another trader. This scandal continues to grow as the bank prepares for what it believes will be hefty finds by regulators. Accusations were that efforts were made to compromise key benchmark interest rates which resulted in more than £290m in penalties so far. RBS is 81% owned by taxpayers. Its third quarter earnings are expected the end of October and it's believed it will face tough questions regarding Libor. In the meantime, it continues to reiterate its total cooperation with law enforcement and bank regulators. Another bailed out and taxpayer invested bank, Lloyds Banking Group continues its cooperation as well. It's already received several subpoenas, including those from other countries such as the U.S.

You may recall RBS fired four traders in 2011, including on trader, Tan Chi Min, who sued the bank and claims he was fired wrongfully. In its latest firing, it let go of Jexri Mohideen, who was the head of rates trading in both Europe and Asia Pacific. Another suspension was announced as well, though it's unclear whether that suspension was an actual discharge. Ken Choy, based in Singapore and who is a foreign exchange trader, was suspended while an investigation continued by local law enforcement. The Wall Street Journal is reporting he's on compliance leave.

"It is currently not possible to predict the scope and ultimate outcome of the various regulatory investigations or private lawsuits, including the timing and scale of the potential impact of any investigations and private lawsuits on the group," Lloyds said in a presser during its half year results in this past summer. Concerns are that it might be forced to issue new payment provisions for its misselling of insurance. There's already been more than £4bn set aside to cover imminent claims.

In the U.S., Eric Schneiderman, New York attorney-general as well as George Jepsen, the Connecticut attorney-general, are requesting information from banks. More than a dozen banks around the world are thought to be co-operating with regulators in the UK, Europe, the US, Switzerland and in Asia.