RBS Fined $85 Million Over Interest-Rate Benchmark--Update
February 03 2017 - 12:16PM
Dow Jones News
By Katy Burne
The Commodity Futures Trading Commission ordered Royal Bank of
Scotland Group PLC to pay $85 million to settle charges that it
attempted to rig a key pricing gauge for derivatives in the years
surrounding the financial crisis.
The civil penalty announced Friday marks the latest enforcement
action over banks' attempted manipulation of global financial
benchmarks, and the fourth by the CFTC for a benchmark used to
settle contracts tied to billions of dollars of interest-rate
trades.
In the order, the CFTC charged RBS with trying to rig the rate,
called ISDAFIX, over a five-year period from Jan. 2007 to March
2012. The CFTC previously has charged Goldman Sachs Group Inc. $120
million, Citigroup $250 million and Barclays PLC $115 million over
attempts to rig ISDAFIX.
Ross McEwan, chief executive of RBS since 2013, said in a
statement: "This is an example of past misconduct that has no place
at RBS and we strongly condemn these actions."
ISDAFIX is widely used in areas such as setting payouts on
pension funds and valuing complex financial contracts between banks
and institutional investors. Its name comes from the global trade
group, the International Swaps and Derivatives Association, which
in 2014 changed the way the benchmark is calculated after it
attracted scrutiny from regulators.
The CFTC said RBS traders located in Stamford, Conn., acted
through an unidentified derivatives broker, whose job it was to
poll market participants daily at 11 a.m. ET for the repricing of
the benchmark. It said the bank's aim was to benefit its own
trading positions whose values were set off the rate.
In emails and audio recordings collected by the CFTC, the agency
found one email from an RBS trader, labeled Swaps Trader 1, who
joked that charges relating to hedge fund Amaranth's trades in the
energy market were charges for rigging ISDAFIX.
"An RBS swap trader converted a news story about the lawsuit
into a prescient 'joke' where RBS took the place of Amaranth as the
manipulator sued by the government," the CFTC said in the
order.
Mr. McEwan said in his statement that such findings "make for
uncomfortable reading and we have already taken significant steps
to make sure this kind of behavior cannot happen again."
Under the order, RBS agreed to implement new controls to ensure
the integrity of its participation in setting interest-rate
benchmarks. The new moves include measures to detect and deter
trading, potentially intended to manipulate swap rates.
"People around the world rely on benchmark rates such as
ISDAFIX," said Aitan Goelman, director of the CFTC's enforcement
division in a statement. He said the CFTC actions "make clear that
the Commission takes very seriously its role in ensuring the
integrity of any and all benchmarks used in our markets."
Write to Katy Burne at katy.burne@wsj.com
(END) Dow Jones Newswires
February 03, 2017 12:01 ET (17:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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