Tag Archive: Royal Bank of Scotland


US attorney general says banks under investigation not ‘too big to jail’

Eric Holder announced in video address that Justice Department pursuing criminal investigations of financial institutions

Eric Holder
While Holder did not name any banks, he said he is personally monitoring the ongoing investigations into financial institutions. Photo: Matt Rourke /AP

The US Justice Department is pursuing criminal investigations of financial institutions that could result in action in the coming weeks and months, US attorney general Eric Holder said in a video, adding that no company was “too big to jail.”

The comments, made in a video posted on the Justice Department’s website on Monday, came as federal prosecutors push two banks, BNP Paribas SA and Credit Suisse AG , to plead guilty to criminal charges to resolve investigations into sanctions and tax violations, respectively, according to people familiar with the probes.

While Holder did not name any banks, he said he is personally monitoring the ongoing investigations into financial institutions and is “resolved to seeing them through.”

“I intend to reaffirm the principle that no individual or entity that does harm to our economy is ever above the law,” Holder said in the video. “There is no such thing as ‘too big to jail.'”

French bank BNP Paribas warned last week it faces fines from US authorities in excess of $1.1bn over allegations that it violated US sanctions against Iran and other countries.

The Swiss finance minister met Holder on Friday to discuss a US probe into Swiss banks that allegedly helped Americans evade US taxes, which includes Credit Suisse.

While units of financial institutions have agreed to plead guilty to breaking US criminal laws, such agreements have usually involved foreign subsidiaries who have little contact with US regulators.

Japanese units of UBS AG and Royal Bank of Scotland plc, for example, pleaded guilty in the past two years to resolve criminal charges that their traders manipulated the Libor benchmark interest rate.

A criminal conviction of an entity regulated in the United States could lead authorities to potentially revoke a charter or undertake other punitive measures.

 

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RBS suspends FX trader, bringing total to three

LONDON Wed Feb 19, 2014 12:51pm GMT

A sign is seen outside a Royal Bank of Scotland building in central London January 28, 2014. REUTERS/Paul Hackett

A sign is seen outside a Royal Bank of Scotland building in central London January 28, 2014.

Credit: Reuters/Paul Hackett

(Reuters) – Royal Bank of Scotland (RBS.L) has suspended a senior currency trader in London, bringing to three the number of traders suspended by the bank since a global investigation into allegations of rigging reference exchange rates was launched last year.

Ian Drysdale was put on leave earlier this week and has now been suspended, a source familiar with the matter said.

This follows the suspension of Julian Munson and Paul Nash in October last year.

RBS declined to comment, and Drysdale could not be reached for comment.

On Tuesday RBS said it was reviewing rules on currency dealers trading with their own money.

The global probe into online communications between traders and allegations of manipulating benchmark currency rates known as “fixings” has seen more than 20 traders at many of the world’s biggest banks put on leave, suspended or fired.

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Another RBS trader suspended over foreign exchange rigging probe

As many as 20 foreign exchange traders at a handful of banks are thought to have been suspended as regulators investigate
Royal Bank of Scotland

Royal Bank of Scotland has paid $275m to settle a class action suit relating to the way it sold mortgage-based securities in 2008. Photograph Facundo Arrizabalaga/EPA

Another currency trader at Royal Bank of Scotland has been suspended as regulators around the world continue their investigation into potential rigging of the £3tn a day foreign exchange market.

The bank would not comment on reports that Ian Drysdale had been placed on leave earlier in the week and was now suspended, becoming the third RBS forex trader to be suspended.

RBS is just one of a handful of banks suspending or firing traders amid allegations that Martin Wheatley, the chief executive of the Financial Conduct Authority, has said are every bit as bad as those about Libor, the benchmark interest rate.

As many as 20 foreign exchange traders are thought to have been asked to stay away from their roles in banks around the world as a result of the investigations which are thought to be at the early stages.

The 81% taxpayer-owned bank is also continuing to take hits to clean up past issues, with a $275m (£165m) payout on Wednesday to settle a class action suit relating to the way it sold mortgage-based securities during the 2008 banking crisis.

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20 more banks were rigging interest rates: British bankers now facing criminal inquiry over scandal that was kept secret for years

  • Barclays shares drop 15 per cent as pressure on Diamond grows
  • George Osborne promises new criminal sanctions for market abusers
  • RBS, HSBC and Lloyds all named as under investigation as scandal widens

By James Chapman, Becky Barrow, Ruth Sunderland and Rob Davies

Hundreds of bankers across three continents are embroiled in the interest-rate fixing scandal that has left Barclays chief executive Bob Diamond fighting to save his job.

As pressure intensified on Britain’s highest paid banking boss to quit, MPs heard a string of other financial institutions across the world were under investigation.

At least 20 banks are believed to be under suspicion, with growing demands for a criminal investigation.

Barclays Bank Tower at Churchill Place, Docklands: The bank has been fined £290million over attempts to rig money market interest rates. HSBC is also under investigation, it emerged todayBarclays Bank Tower at Churchill Place, Docklands: The bank has been fined £290million over attempts to rig money market interest rates. HSBC is one of the twenty other banks also under investigation, it emerged today

Barclays’ shares crashed by 15.5 per cent in a day as the implications sank in, wiping £3.7billion from its value, with other banks also hit.

Barclays has been fined £290million after devastating emails revealed that its traders manipulated the London Interbank Rate (Libor) – the rate at which banks lend money to each other.

Chancellor George Osborne told the Commons the exchanges ‘read like an epitaph to an age of irresponsibility’.

On the blackest day for Britain’s finance industry since the 2008 economic crisis:

  • Serious Fraud Office investigators were revealed to be in talks with financial watchdogs over the scandal
  • David Cameron and Ed Miliband piled pressure on Mr Diamond to resign
  • Barclays and other banks were braced for a damning verdict today in an official report on mis-selling of complex loans to 28,000 small firms
  • Mr Osborne promised new criminal sanctions for those guilty of market abuse
  • Downing Street faced a growing clamour for a judge-led public inquiry into the ethics of Britain’s banks
'Epitaph to an age of irresponsibility': George Osborne today briefed MPs in the Commons about the unfolding bank trading scandal

SACKED RBS TRADER ACCUSES BANK CHIEFS OF COLLUDING WITH STAFF TO RIG INTEREST RATES

The alleged behaviour at RBS started when Fred Goodwin was chief executiveThe alleged behaviour at RBS started when Fred Goodwin was chief executive

Royal Bank of Scotland managers are accused of colluding to rig the financial markets in court papers filed by a former employee.

Tan Chi Min, a former head of delta trading for RBS’s global banking and markets division in Singapore, alleges that managers condoned collusion between its staff to set the Libor rate artificially high or low to maximise profits.

He names five staff members he claims made requests for the Libor rate to be altered and three senior managers who he said knew what was going on. He also says the practice ‘was known to other members of [RBS]’s senior management’.

Mr Tan, who was eventually sacked for gross misconduct, worked for RBS from August 2006 to November 2011 and it is believed the alleged behaviour started when Fred Goodwin, pictured, was chief executive.

He claims that he was made a ‘scapegoat’ for malpractice condoned by managers and is suing for wrongful dismissal.

In the court papers filed in New York as part of a class action, Mr Lin also implicates hedge fund bosses who have given thousands of pounds to the Conservative Party.

It is claimed that hedge fund Brevan Howard asked RBS to fix financial data by making false submissions. The fund donated £10,000 to the Tories and spent £3,542 on flights for George Osborne to attend a conference in 2008.

RBS said it was confident of mounting a successful defence against Mr Tan’s claims.
Last night there were reports the bank is to be fined £150million for similar offences to those committed by Barclays.

Lloyds said it had suspended two traders. ICAP, the leading City broking firm headed by Tory donor Michael Spencer, has also been dragged into the scandal. It has suspended one employee and placed two on ‘administrative leave’.

A senior manager at U.S. giant Citigroup’s Japanese operation left the firm late last year after his division was temporarily banned from trading linked to Libor and its Tokyo equivalent, Tibor, by the authorities.

Giant Swiss bank UBS said it had approached regulators with information over abuses of the rate-setting system.

The Libor rate is crucial, since it is a key benchmark for trillions of pounds’ worth of financial products.

The £290million fine on Barclays from the UK and U.S. authorities, issued on Wednesday, is likely to be only the beginning of a wave of punishments and civil suits for damages against other banks caught up in the global web of deceit.

The Royal Bank of Scotland Headquarters
The headquarters of Lloyds Banking Group in the City of London

Royal Bank of Scotland and Lloyds are two other UK-based banks under scrutiny as part of the probe

Experts said banks might have to set aside billions of pounds in damages to cover their liabilities resulting from the conspiracy.

Former Liberal Democrat Treasury spokesman Lord Oakeshott said that once any criminal probe was underway, a public inquiry – like the one being conducted by Lord Leveson into media ethics – would have to be held.

‘Clearly, the worms that are now crawling out from under the stones at the banking industry are even worse than any of us thought,’ he added.

Eurozone crisis: Banking sector could be ‘wiped out’ if weakest nations leave

Analysis by Credit Suisse estimates that up to 58% of the value of Europe’s banks could be wiped out by the departure of the ‘peripheral’ countries

Soup kitchen in Athens Greece

A soup kitchen in Athens, Greece. Photograph: John Kolesidis/Reuters

Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) lossif the euro crisis results in the single currency bloc breaking apart, according to one of the first indepth analyses of what might happen if the eurozone disintegrates.

The analysis by Credit Suisse estimates that up to 58% of the value of Europe‘s banks could be wiped out by the departure of the “peripheral” countries – Greece, Ireland, Italy, Portugal and Spain – from the eurozone.

Even if the single currency remains intact some €1.3tn of credit could be sucked out of the system as banks retrench to their home markets, unwinding years of financial integration, the Credit Suisse analysis warns. his represents as much as 10% of the credit in the financial system.

“We find that a Greek exit could be manageable … but in a peripheral exit, few of the large listed eurozone banks would be left standing,” the Credit Suisse report said.

The banking sector could need capital injections of as much as €470bn if the three scenarios considered by the Credit Suisse analysts – a Greek exit, an exit of the periphery countries and a situation where banks retrench domestically – happen at once.

The UK’s banks will not escape unscathed, although they are better insulated than those in the eurozone. In the event that the peripheral countries leave the eurozone, Barclays faces losses of €37bn and bailed out Royal Bank of Scotland some €26bn.

If only Greece were to leave the single currency, the Credit Suisse analysts calculate that losses for Europe’s banks would be limited to some 5% of the stock market value of banks across the eurozone with French banks and investment banks being hit hardest. Credit Agricole would be worst effected by a Greek exit.

The Credit Suisse analysts insist they are not expecting the euro area to break up – or for Greece to leave – but they believe it is likely there will be a dramatic reduction in cross-border business – leading to less loans for businesses and individuals. The International Monetary Fund has estimated that some €2tn of credit could be lost through a eurozone break up and the Credit Suisse analysts point out they have only analysed the impact on banks they research.

Ratings agency Fitch also estimated the impact of a Greek exit from the eurozone. While the direct impact would be minimal, Fitch warned that “the indirect impact of a Greek redenomination on banks throughout the eurozone could be severe”.

“A robust response from policymakers would be required to prevent contagion, and Fitch would expect a strong public statement of commitment by the European Central Bank and eurozone policymakers to provide support, if required,” Fitch said.

“Banks in Portugal and Ireland are more vulnerable to contagion risks as these nations could be perceived ‘next in line’ for a euro exit. If the EU policy response fails to control contagion risks and if bank runs and capital flight were to become a reality, banks in these countries would be under severe stress,” it said.

The Credit Suisse analysts said that banks have been preparing for a potential Greek exit so the impact would be limited, so long as “it is an orderly event”.

But if there is an exit of the five countries in the periphery the the consequences for the banks in those countries would be substantial”with some of them having their tangible equity largely wiped out”. Among those which would fall into this category are Intesa Sanpaolo in Italy.

 

 

 

Beijing on alert for possible Greek eurozone exit

  • Xinhua
An election poster for Greece's left-wing Syriza party. (File photo/CNS)An election poster for Greece’s left-wing Syriza party. (File photo/CNS)

China must take precautions against a possible exit by debt-ridden Greece from the eurozone, as an exit could cause turbulence in global financial markets and hurt exports and growth, government economists and analysts have warned.

Measures they have suggested to counter the crisis include adjusting asset holdings in the eurozone, boosting domestic demand, promoting structural reforms and hedging exchange losses, as well as maintaining a stable currency.

The world’s second-largest economy might see its year-on-year growth dip below 7% if Greece leaves the eurozone under current circumstances, according to Ba Shusong, an economist with the Development Research Center of the State Council, China’s cabinet. “That scenario and its impact on employment would be undesirable for the Chinese government,” Ba said.

His comments come ahead of national election polls conducted in Greece on Sunday, with global investors fearing that a left-wing coalition government will emerge from the election and tear down the bailout deals that have kept Greece afloat since 2010, leading to default and an exit from the eurozone.

Financial turbulence in Europe was a major driver in China’s economic downshift early this year, as it reduced external demand markedly, Ba said, adding that a Greek exit from the eurozone will make the situation worse.

He urged authorities to follow developments in Europe closely and adjust economic policies in line with the changes. China should reduce its holdings of assets in the eurozone’s peripheral countries if Greece moves toward an exit, Ba suggested.

To offset external impact with domestic demand, the government must continue to maintain investment growth, carry out structural tax reduction and boost the role of private capital, he added. There is a strong possibility that Greece will drop out of the eurozone in the future if economic turmoil continues in the region, although it is unlikely that it will happen immediately, Ba estimated.

The economist noted that if Greece stays in the eurozone, China’s exports will pick up after bottoming in the second quarter of 2012 and there should not be any massive fiscal stimulus like the 4-trillion-yuan (US$634 billion) investment plan rolled out in late 2008 to counter the global financial crisis.

Xiang Songzuo, deputy head of the International Monetary Institute at Renmin University of China in Beijing, said Greece is unlikely to withdraw from the eurozone at present and will return to talks with the EU, no matter which party gains power in the election.

Xiang said the government should take measures to maintain financial stability, especially the stability of the Chinese currency, adding that Beijing’s current policies to support growth are already the best response to the eurozone crisis.

China’s economy expanded at its slowest rate in nearly three years in the first quarter of 2012, growing 8.1% year on year, as the European sovereign debt crisis diminished export orders and a subdued property sector cooled investment.

Export and industrial output growth rebounded slightly in May from lower-than-expected levels in April, but fixed-asset investment and retail sales have continued to slow, according to official data. To buoy the slowing economy, China announced its first interest rate cut in more than three years last week. It has also fast-tracked some investment projects, opened the way for private capital to enter state-dominated industries and provided subsidies for purchases of energy-saving home appliances.

Economic troubles are likely to continue to plague Greece, which will weaken China’s exports gradually, said Yao Wei, China economist at Societe Generale. China’s monthly import and export growth will likely stay in the single digits from now until the third quarter, he forecast. However, Xiang said he believes there is no need to worry too much about the impact, as China’s major trading partner in the eurozone is Germany, whose economy remains resilient.

Exporters have been advised to prepare for fluctuations in the euro’s value against the Chinese yuan, which will incur greater risks of exchange losses.

The euro is expected to continue depreciating against the yuan in the near future and Chinese firms can use forward foreign exchange contracts and other financial derivatives to hedge exchange risks, said Ye Yaoting, a foreign exchange analyst with the Bank of Communications.

Companies should change euros into US dollars or yuan and receive future payments in non-euro currencies as much as possible, advised Wan Chao, an investment manager at Ping An Asset Management.

The EU is China’s largest trading partner. Its trade with China edged up 1.3% year on year in the first five months of 2012, compared to the 7.7% growth of the country’s total foreign trade.

Meanwhile, Chinese banks have been scaling back financial derivative trading with European banks to reduce exposure to risks. The Bank of China, the country’s third-largest lender, suspended purchases of derivatives, such as credit default swaps, from French banks Societe Generale and Credit Agricole at the end of 2011.

Industrial and Commercial Bank of China and Bank of Communications have also reduced investment product transactions with Societe General, Credit Agricole and French lender BNP Paribas, according to the banks’ reports.

Although China’s financial sector has very limited exposure to sovereign and bank asset risks in the eurozone, massive capital outflow from risky markets will affect China if Greece breaks away from the eurozone, Yu Yongding, a former central bank adviser, was reported as saying in late May.

China’s central bank and other departments should consider measures, including capital controls, capital market suspension and contingency fund injections, to counter the impact of a possible Greek withdrawal, Yu proposed.