Thousands of staff across the Royal Bank of Scotland will lose their bonuses this year as the bank claws back money to pay fines for its part in the London inter bank offer rate (Libor) manipulation scandal.
Stephen Hester, chief executive of RBS, refused to state how big the bank's bonus pool would be this year as the financials are due out in two weeks' time, but said much of the money will be clawed back from about 1,500 people in the markets part of RBS.
The news should be welcomed by business secretary Vince Cable who has, among other politicians, loudly stated this week that the Libor fines must be paid by the banks' workers and not the taxpayer.
RBS has regularly recovered payments from previous years, but the board is not considering clawing back the bonus handed to Stephen Hester. It will be the only bonus Hester's received, as his 2012 bonus was removed after RBS's IT systems failed last summer, and a £1.6 million bonus for 2009 was waived over concerns about the bank's huge losses that year.
There were three of four ring leaders at the top of the manipulations who were all dismissed more than a year ago - in total 21 people were directly involved in the scandal, 14 of whom have already left the bank.
Not everyone was fired though - some received final written warnings - including one to a young graduate who had only just joined the bank and got caught up in an email exchange, according to Hester.
The bank maintains there is no evidence that traders deliberately tried to mislead the markets about the banks cost of borrowing, and that all of the manipulation was done by traders for personal gain.
The press conference also saw Hester come under fire for not considering his own resignation; head of markets John Hourican has announced he will step down, handing back bonuses and shares that haven't yet been invested as part of his punishment, but Hester avoided answering a question on whether he considered his position.
"I have made it clear to stakeholders that if they don't have confidence in me, I can't do my job," said Hester. "This has been a soap opera for the past four years, and there are ups and downs."
The RBS chairman Philip Hampton added it was "clear that in this case accountability doesn't attach to Stephen" or his team at the bank.
Hampton also admitted that there were no controls or systems in place to deal with Libor. "Generally speaking, banks didn't have controls in place," he added. He was also unconcerned about RBS traders leaving the bank as a result of not getting their bonuses.
Worryingly, Hester also said he believed "other things will come out" both at RBS and at other banks in the near future - hinting at further wrongdoing being exposed.
The Financial Services Authority has published its full report into RBS's fines, and detailed some of the emails between traders which it used as evidence against the bank.
For example:
Broker B: u see 3m jpy libor going anywhere btween [sic] now and IMM?
Primary Submitter B: looks fairly static to be honest, poss more pressure on upside, but not a lot
Broker B: Oh. we hve a mutual friend who'd love to see it go down, no chance at all?
Primary Submitter B: haha [External Trader A] by chance
Broker B: shhh
Primary Submitter B: hehehe, mine should remain flat, always suits me if anything to go lower as I rcve funds
Broker B: gotcha, thanks, and, if u cud see ur [sic] way to a small drop there might be a steak in it for ya, haha
Primary Submitter B: noted ;-)
In another exchange, Derivatives Trader B asked to "bump up" RBS's six-month Japanese yen Libor submission to 0.755. Because RBS only submitted to two decimal places, the Primary Submitter rounded up to 0.76. The next day, the following exchange took place between the two with respect to RBS's Japanese Libor submission:
Derivatives Trader B: can we push up 6m again pls?
Primary Submitter B: ok will try
Derivatives Trader B: what do you think we can go for?
Primary Submitter B: 77, today
Derivatives Trader B: ok, thks, that’s what you think it will be or what we will go with?
Primary Submitter B: what I will go, don’t see much change from yesterday really, problem being that there was some cash traded longer end 6m and 1yr at libor levels yesterday so market will be [loath] to move, first time we seen cash trades that far out for a long long time
Derivatives Trader B: ok thanks
And on a Swiss franc manipulation, the following exchange was spotted
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