Release Number 6510-13

February 6, 2013

CFTC Orders The Royal Bank of Scotland plc and RBS Securities Japan Limited to Pay $325 Million Penalty to Settle Charges of Manipulation, Attempted Manipulation, and False Reporting of Yen and Swiss Franc LIBOR

With this Order, the CFTC has now imposed penalties of more than $1.2 billion on banks for manipulative conduct with respect to LIBOR and other benchmark interest rates

Washington, DC The U.S. Commodity Futures Trading Commission (CFTC) today announced an Order against The Royal Bank of Scotland plc and RBS Securities Japan Limited (collectively, RBS or the Bank), bringing and settling charges of successful manipulation, attempted manipulation, and false reporting relating to LIBOR for Yen and Swiss Franc, which are benchmark interest rates critical to financial markets and the public. The Order requires RBS to pay a $325 million civil monetary penalty, cease and desist from further violations as charged, and take specified steps to ensure the integrity and reliability of LIBOR and other benchmark interest rate submissions, including improving related internal controls.

“The integrity of LIBOR depends on truthful information provided by a select group of some of the world’s most important banks. The public is deprived of an honest benchmark interest rate when a group of traders sits around a desk for years falsely spinning their bank’s LIBOR submissions, trying to manufacture winning trades. That’s what happened at RBS,” said David Meister, the CFTC’s Director of Enforcement.

The Order finds that:

    • As recently as 2010 and dating back to at least mid-2006, RBS made hundreds of attempts to manipulate Yen and Swiss Franc LIBOR, and made false LIBOR submissions to benefit its derivatives and money market trading positions; RBS succeeded at times in manipulating Yen and Swiss Franc LIBOR;

    • At times, RBS aided and abetted other panel banks’ attempts to manipulate those same rates;

    • The misconduct involved more than a dozen RBS derivatives and money market traders, one manager, and multiple offices around the world, including London, Singapore, and Tokyo; and

    • The unlawful conduct continued even after RBS traders learned that a LIBOR investigation had been commenced by the CFTC.

With this Order, the CFTC has now imposed penalties of more than $1.2 billion on banks for manipulative conduct with respect to LIBOR submissions and other benchmark interest rates, and has required each bank to comply with undertakings specifying the factors upon which submissions should be made, including making the determination of submissions transactions focused, and requiring implementation of internal controls and policies needed to ensure the integrity and reliability of submissions. With the undertakings, each bank represents that its benchmark interest rate submissions “shall be based on a rigorous and honest assessment of information, and shall not be influenced by internal or external conflicts of interest, or other factors or information extraneous to any rules applicable to the setting of a [b]enchmark [i]nterest [r]ate,” according to the Order.

According to the CFTC’s Order against RBS, the various ways in which RBS conducted its manipulative scheme all followed a similar pattern. The profitability of RBS’s Yen and Swiss Franc derivatives positions, such as interest rate swaps, depended on Yen and Swiss Franc LIBOR, as did certain of RBS’s money market positions. RBS traders would ask their colleagues to make false LIBOR submissions that were beneficial to RBS’s trading positions. The traders’ requests were either for falsely high submissions or falsely low ones, whatever was needed to turn a profit. The submitters often accommodated those requests by making false submissions. Some of these submitters were even traders themselves, and skewed their LIBOR submissions to drive the profitability of their own money market and derivatives trading positions.

RBS created an environment for a number of years that eased the path to manipulation by placing derivatives traders and submitters together on the same desk, heightening the conflict of interest between the profit motives of the traders and the responsibility of submitters to make honest submissions. When derivatives traders and submitters eventually were separated (for business, not compliance reasons), the misconduct continued through Bloomberg chats and an internal instant messaging system.

According to the Order, RBS derivatives traders also unlawfully worked in concert with a trader from a UBS AG subsidiary (UBS), another LIBOR panel bank, in attempts to manipulate Yen LIBOR, and with a trader at another panel bank in attempts to manipulate Swiss Franc LIBOR. RBS also aided and abetted UBS’s attempts to manipulate Yen LIBOR by executing wash trades (trades that result in financial nullities) to generate extra brokerage commissions to compensate two interdealer brokers for assisting UBS in its unlawful manipulative conduct. On at least one occasion, RBS also requested the assistance of an interdealer broker to influence the submissions of multiple panel banks in an attempt to manipulate Yen LIBOR.

The Order finds that RBS attempted to manipulate Yen and Swiss Franc LIBOR even after questions arose in the media in 2007 and 2008 about the integrity of banks’ LIBOR submissions, LIBOR reviews and guidance by the British Banker’s Association in 2008 and 2009, and the CFTC’s request in April 2010 that RBS conduct an internal investigation relating to its U.S. Dollar LIBOR practices. In fact, certain RBS employees involved in the misconduct were aware of the LIBOR investigation, yet continued their manipulative conduct and tried to conceal the conduct by minimizing their use of written messages to conduct the scheme.

The Order further finds that RBS’s traders were able to carry out their many attempts to manipulate Yen and Swiss Franc LIBOR for years because RBS lacked internal controls, procedures and policies concerning its LIBOR submission processes, and failed to adequately supervise its trading desks and traders. RBS did not institute any meaningful controls, procedures or policies concerning LIBOR submissions until on or about June 2011. During this time, RBS was experiencing significant growth on its Yen and Swiss Franc trading desks, generating revenues for RBS that were multiplying over the years.

The CFTC Order also recognizes the cooperation of RBS with the Division of Enforcement in its investigation.

In related actions by the U.S. Department of Justice, RBS Securities Japan Limited agreed to plead guilty to a criminal charge of wire fraud, The Royal Bank of Scotland plc entered into a deferred prosecution agreement whereby it would continue to cooperate with the U.S. Department of Justice in exchange for the deferral of criminal wire fraud and antitrust charges, and RBS collectively accepted a penalty of $150 million. In addition, the United Kingdom Financial Services Authority (FSA) issued a Final Notice regarding its enforcement action against The Royal Bank of Scotland plc and imposed a penalty of £87.5 million, the equivalent of approximately $137 million.

The CFTC thanks and acknowledges the valuable assistance of the FSA, the U.S. Department of Justice, the Washington Field Office of the Federal Bureau of Investigation, the U.S. Securities and Exchange Commission, the Monetary Authority of Singapore, the Financial Services Agency of the Government of Japan, the Australian Securities and Investments Commission, and the Securities and Futures Commission of Hong Kong.

CFTC Division of Enforcement staff members responsible for this case are Jonathan K. Huth, Aimée Latimer-Zayets, Brian G. Mulherin, Maura M. Viehmeyer, Rishi K. Gupta, Timothy M. Kirby, Terry Mayo, Elizabeth Padgett, Anne M. Termine, Philip P. Tumminio, Jason T. Wright, Gretchen L. Lowe, and Vincent A. McGonagle. CFTC Staff from the Division of Market Oversight and Office of the Chief Economist also assisted with the investigation of this matter.


Yen LIBOR Manipulative Conduct Within RBS:

August 20, 2007: (Emphasis added.) (RBS Order pp. 17-18.)

Yen Trader 4: where’s young [Yen Trader 1] thinking of setting it?

Yen Trader 1: where would you like it[,] libor that is[,] same as yesterday is call

Yen Trader 4: haha, glad you clarified ! mixed feelings but mostly I’d like it all lower so the world starts to make a little more sense.

Senior Yen Trader: the whole HF [hedge fund] world will be kissing you instead of calling me if libor move lower

Yen Trader 1: ok, i will move the curve down[,] 1bp[,] maybe more[,] if I can

Senior Yen Trader: maybe after tomorrow fixing hehehe

Yen Trader 1: fine[,] will go with same as yesterday then

Senior Yen Trader: cool

Yen Trader 1: maybe a touch higher tomorrow

August 20, 2007: (Emphasis added.) (Reflecting awareness of UBS conduct.) (RBS Order pp. 14-15.)

Senior Yen Trader: this libor setting is getting nutss


Bank A Trader: im puzzled as to why 3m libor fixing not coming off after the FED action


Bank B Trader: [UBS] is lending dolls through my currencies in 3 month do u see him doing the same in urs


Senior Yen Trader: yes[,] he always led usd in my mkt[,] the jpy libor is a cartel now


Senior Yen Trader: its just amazing how libor fixing can make you that much money


Senior Yen Trader: its a cartel now in london[.] they smack all the 1yr irs ..and fix it very high or low

December 5, 2007: (Emphasis added.) (RBS Order p. 15.)

Yen Trader 2: FYI libors higher again today


Yen Trader 4: ‘ucksake. keep ours low if poss. don’t understand why needs to go up in yen

Yen Trader 2: no reason dude[,] [Bank C] and [Bank D] went high yest

Yen Trader 4: send the boys round


Yen Manager: pure manipulation going on

April 2, 2008: (Emphasis added.) (RBS Order p. 10.)

Senior Yen Trader: nice libor[.] our 6m fixing move the entire fixing[.] hahahah

Yen Trader 1: the BBA called to ask me about that today

Senior Yen Trader: really?

Yen Trader 1: yes

Senior Yen Trader: they complain?

Yen Trader 1: asked to speak to me about the low 6m rate

Yen Trader 1: no[,] just to make sure i was happy with it


Senior Yen Trader: i think some banks must have complain

Yen Trader 1: he called b4 any of the other banks saw our data[,] at about 11.15[,] to check it was ok

Senior Yen Trader: oh then its fine

Yen Trader 1: before publishing

Senior Yen Trader: i am sure some HF [hedge fund] will complain tomorrow ..

Yen Trader 1: tough

Senior Yen Trader: we will say we lower every tenor ..1m 3m 6m ..we feel rbs name has very good credit problem getting money in

Senior Yen Trader: good way to boost share price!

Senior Yen Trader: our 3m libor is at top end …6m at bottom end …just the ideal level!

September 3, 2009: (RBS Order p. 9.)

Senior Yen Trader: [Yen Trader 6], can you ask [Primary Submitter] to drop 3m Libor by 1 bps? hold 6m libor unchange [sic] thanks

Yen Trader 6: Yes[,] going over to his desk now[,] yup, 6s going unch, 3s will drop by 1

Senior Yen Trader: domo

September 14 and 15, 2009: (Emphasis added.) (Primary Submitter agrees to switch direction of submissions over two consecutive days.) (RBS Order p. 16.)

September 14:

Yen Trader 1: high 3s and 6s please

Primary Submitter: ok

September 15:

Yen Trader 1: can we lower our fixings today please [Primary Submitter]

Primary Submitter: make your mind up[,] haha , yes no probs

Yen Trader 1: im like a whores drawers

Yen Manager’s Participation

August 22, 2007: (RBS Order pp. 10-11, 18.)

Yen Manager: Hi Mate, where are u calling the 6m and 3s Libor today ?

Yen Trader 1: i put in 1.05 and 1.15

Yen Manager: ok that close to consensus ?

Yen Trader 1: i think my 3s are too high[,] 6s will prob be 1.13 too[,] but i wanted high fixes today

Yen Manager: ok cool[,] its all a random variable for us at this stage it is just we have some small fixings

Yen Trader 1: well let me know if you have any preferencves [sic][,] each day

Yen Manager: thx will do

December 3, 2007: (RBS Order p. 11.)

Yen Manager: for choice we want lower libors...let the [Money Market] guys know pls

Yen Trader 2: sure i am setting today as [Yen Trader 1] and cash guy off [Primary Submitter]

Yen Manager: great set it nice and low

Yen Trader 2: 1.02 in 6m or lower

Yen Manager: yeh lower

Yen Trader 2: 1.01 then cant really go much lower than that

Yen Manager: ok

Yen Trader 2: u care for 1m and 3m too[?] looks to me like fra map pretty flat

Yen Manager: lower generally dude

Yen Trader 2: cool

Yen Manager: within the acceptable bounds

Yen LIBOR Collusion With UBS:

February 15, 2007: (RBS Order p. 20.)

Yen Trader 2: how many people can u get to put this 1m libor low

UBS Yen Trader: well us[,] [Bank E,] and a few others i think

February 21, 2007: (RBS Order p. 20.)

Yen Trader 2: what ur guys calling 3s libor[?] we need to get some low fixes

UBS Yen Trader: .64[,] yes will ask for low low high[,] 1m 3m 6m

Yen Trader 2: our guy agrees but reckons it will be 67[,] not good

UBS Yen Trader: no way!


UBS Yen Trader: […] make sure your boys set low 1m and 3m

Yen Trader 2: will try though [Yen Trader 1/backup Yen LIBOR submitter] wants high 3s and 6s

UBS Yen Trader: we want high 6’s too? don’t let [Yen Trader 1] keep 3m high to help [Senior Yen Trader][,] i hate that guy

May 7, 2008: (RBS Order p. 21.)

UBS Yen Trader: Hi [Sterling Cash Trader] if this is you can you pls ask for a low 6m in jpy for the next few days[.] Hope you are ok, was good seeing you last week[.] Cheers [UBS Yen Trader]

Sterling Cash Trader: Hi mate, I mentioned it to our guy on Friday and he seemed to have no problem with it, so fingers crossed.

Swiss Franc LIBOR Manipulative Conduct Within RBS:

December 4, 2008: (Emphasis added.) (RBS Order p. 25-26.)

Swiss Franc Trader: can u put 6m swiss libor in low pls?

Primary Submitter: NO

Swiss Franc Trader: should have pushed the door harder

Primary Submitter: Whats it worth

Swiss Franc Trader: ive got some sushi rolls from yesterday?


Primary Submitter: ok low 6m , just for u

Swiss Franc Trader: wooooooohooooooo[,] 0.01%? thatd be awesome

Primary Submitter: 1.33

Swiss Franc Trader: perfect[.] u r a nice man

January 30, 2009: (RBS Order p. 26-27.)

Swiss Franc Trader: high 3m libors pls!!!!!!

Primary Submitter: 0.50??

Primary Submitter: 0.51

Primary Submitter: 0.52

Primary Submitter: 0.53

Swiss Franc Trader: 0.54

Swiss Franc Trader: 0.54

Swiss Franc Trader: 0.54

Swiss Franc Trader: 0.54

Swiss Franc Trader: 0.54

Swiss Franc Trader: 0.54

Swiss Franc Trader: 0.54

Swiss Franc Trader: 0.54

Swiss Franc Trader: and low 6m

Primary Submitter: Ok i get ya

Swiss Franc Trader: 0.65

Swiss Franc Trader: 0.65

Swiss Franc Trader: 0.65

Swiss Franc Trader: 0.65

Primary Submitter: ok

Primary Submitter: libors as requested

Swiss Franc Trader: you a top dog

May 5, 2009: (RBS Order p. 27.)

Swiss Franc Trader: can we get high 3m, low 6m pls!

Primary Submitter: maybe


Primary Submitter: ok 41 52

Swiss Franc Trader: perfect perfect

May 14, 2009: (Emphasis added.) (RBS Order p. 28-29.)

Swiss Franc Trader: [Primary Submitter] pls can we get super high 3m[,] super low 6m

Swiss Franc Trader: PRETTY PLEASE!

Primary Submitter: 41 & 51

Swiss Franc Trader: if u did that[,] i would lvoe [sic] u forever

Primary Submitter: 41 & 55 then …

Swiss Franc Trader: if u did that i would come over there and make love to you[,] your choice

Primary Submitter: 41+51 it is

Swiss Franc Trader: thouht [sic] so

Primary Submitter: so shallow

RBS Collusion With Interdealer Brokers:

June 26, 2009: (Emphasis added.) (RBS Order p. 24.)

Interdealer Broker B: Hello mate, [Yen Trader 1]? You all set?

Yen Trader 1: Yeah.

Interdealer Broker B: Right listen we’ve had a couple of words with them, you want them lower right?

Yen Trader 1: Yeah.

Interdealer Broker B: Alright okay, alright listen, we’ve had a couple words with them. You want them lower, right?

Yen Trader 1: Yeah.

Interdealer Broker B: Alright okay, alright, no we’re okay just confirming it. We’ve, so far we’ve spoke to [Bank F]. We’ve spoke to a couple of people so we’ll see where they come in alright. We’ve spoke, basically one second, basically we spoke to [Bank F], [Bank G], [Bank H], who else did I speak to? [Bank I]. There’s a couple of other people that the boys have spoke to but as a team we’ve basically said we want a bit lower so we’ll see where they come in alright?

Yen Trader 1: Cheers.

Interdealer Broker B: Cheers no worries mate.

March 3, 2010: (Emphasis added.) (Former Sterling Cash Trader now employed by Interdealer Broker A.) (RBS Order p. 22.)

Former Sterling Cash Trader: can i pick ur brain?

Primary Submitter: yeah

Former Sterling Cash Trader: u see 3m jpy libor going anywhere btween now and imm?

Primary Submitter: looks fairly static to be honest , poss more pressure on upside , but not alot

Former Sterling Cash Trader: oh[,] we hve a mutual friend who’d love to see it go down, no chance at all?

Primary Submitter: haha [former UBS Yen Trader at Bank C] by chance

Former Sterling Cash Trader: shhh

Primary Submitter: hehehe , mine should remain flat , always suits me if anything to go lower as i rcve funds

Former Sterling Cash Trader: gotcha, thanks, and, if u cud see ur way to a small drop there might be a steak in it for ya, haha

Primary Submitter: noted ;-)

Former Sterling Cash Trader: 8-)

RBS Yen Trader Engaged In Wash Trades to Compensate Brokers

September 19, 2008: (RBS Order p. 23.)

Interdealer Broker B: can you do me a favour … you’re not going to get paid any bro for this and we’ll send you lunch around for the whole desk. Can you flat…can you switch two years semi at 5 3/4 , 100 yards [meaning 100 billion] … between UBS. Just get … take it from UBS, give it back to UBS. He wants to pay some bro. We won’t bro you…

Yen Trader 1: Yeah, yeah


Interdealer Broker B: Yeah. Yeah. 100 yards … actually can you make it 150 and I’ll send lunch around for everybody?

Yen Trader 1: Yeah.

Interdealer Broker B: Thanks very much. Cheers. Cheers, mate and you choose lunch.

Continuing Conduct after Commencement of Investigation:

November 22, 2010: (Emphasis added.) (RBS Order p. 30.)

Senior Yen Trader: hey think we be able to convince [Primary Submitter] to change the libor today?

Yen Trader 1: i can try

Senior Yen Trader: need to drop 3mth Libor and hike 6m Libor he dropped 6m by 2 bps last Friday

Yen Trader 1: at the moment the FED are all over us about libors

Senior Yen Trader: thats for the USD?

Yen Trader 1: ye[]s

Senior Yen Trader: dun think anyone cares the JPY libor

Yen Trader 1: not yet[,] i will walk over ot [sic] them

November 24, 2010: (Reflecting feigned refusal over Bloomberg Chat, immediately followed by agreement in telephone conversation.) (RBS Order pp. 30-31.)

Bloomberg Chat:

Senior Yen Trader: was wondering if it suits you guys on hiking up 1bp on the 6mth Libor in JPY ... it will help our position tremendously

Primary Submitter: how you doing with all the volatilities these days? ... to be honest happy with levels we see at the moment

Senior Yen Trader: ok no prob ... wouldn’t want to cause any problem ... thanks mate

Telephone Conversation:

Senior Yen Trader: Hello?

Primary Submitter: Morning, [Senior Yen Trader]? Hi, [Primary Submitter].

Senior Yen Trader: Yeah, how are you?

Primary Submitter: I’m pretty good sir. Very Good. We’re just not, we’re not allowed to have those conversations on [instant messages].

Senior Yen Trader: Oh, sorry about that. I didn’t know.

Primary Submitter: (laughter)

Senior Yen Trader: (laughter) Oh because of the, the BBA thing?

Primary Submitter: Yes, exactly.

Senior Yen Trader: Ah, ok ok.

Primary Submitter: So yeah, leave it with me, and uh, it won’t be a problem.

Senior Yen Trader: Ok, great.

Media Contact
Dennis Holden

Last Updated: February 6, 2013