Britain’s Royal Bank of Scotland became the third major bank to be caught up in a global probe of interest- rate manipulation Wednesday, but what makes the $610 million fine against the lender so remarkable is how it will be paid: by the bankers themselves.
Because RBS is 80 percent owned by the British government, which bailed it out during the 2008 financial crisis, the bank plans to cut 2012 bonuses and claw back previous payouts from staffers implicated in the fraud, their managers and some other employees.
To take money from the corporation would, in effect, amount to making British citizens pay for the bank’s role in the scandal.
RBS joins Barclays of the U.K. and UBS of Switzerland to have been found to have rigged the London interbank offered rate, or LIBOR.
This is the rate that banks use to lend money to each other and provides the basis for trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans.
U.S. and U.K. regulators fined RBS more than $460 million for rate- rigging, with $325 million coming from the Commodity Futures Trading Commission and $137 million from the U.K.’s Financial Services Authority.
A unit of RBS agreed to plead guilty in a Department of Justice investigation and accepted a penalty of $150 million.
The investigations by the three organizations uncovered wrongdoing by 21 members of RBS’s staff — all of whom have either left the company or are subject to disciplinary proceedings.
“LIBOR manipulation is an extreme example of a selfish and self-serving culture that took hold in parts of the banking industry during the financial boom,” said RBS chief executive Stephen Hester in a statement. “We will use the lessons learned from this episode as further motivation to reject and change the vestiges of that culture.”
John Hourican, head of RBS’s markets and international banking division, will leave the bank “in recognition of the management issues identified in relation to the settlement,” RBS said.
The bank said Hourican played no part in the misconduct.