Bloomberg reports that a London-based derivatives specialist at RBS, allegedly helped a former UBS employee at the center of the global investigation into rate-rigging, to bribe at least two brokers into persuading other banks to submit rates in line with their own, according to transcripts released by regulators that didn’t identify the traders by name. The regulators didn’t identify the brokers involved.
RBS was fined $612m Wednesday for manipulating global interest rates over a period of four years. The bank has also fired two of the most senior managers on its London trading floor following its own internal probe. The settlement highlights the role interdealer brokers are alleged to have played in helping traders rig the rate for profit. It also shows how intermediaries were rewarded with so-called wash trades that RBS managers never identified.
As interbank lending dried up at the start the financial crisis in late 2007, employees at the banks responsible for inputting rates increasingly relied on information from interdealer brokers in determining what figures to submit, giving the intermediaries greater power to influence the benchmark. The brokers, who act as a go-between for banks that trade bonds, stocks, currencies, energy and derivatives, were rewarded with wash trades, where clients place two or more matching trades through a broker that cancel each other out while triggering a payment of fees to the middle man, regulators said.
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