ROYAL Bank of Scotland was struck a double blow yesterday as it was fined £5.6 million by Britain’s financial regulator for reporting lapses, and snubbed by a leading contender to replace Stephen Hester as chief executive.
The Financial Conduct Authority, which regulates financial markets, said that RBS failed to properly report 44.8 million transactions in the wholesale money markets between November 2007 and February 2013. It also failed to report at all 804,000 transactions between November 2007 and February 2012.
The breach represents 37 per cent of relevant transactions carried out by the majority-taxpayer owned bank in this period, and is another public relations setback as it tries to recover from its disastrous acquisition of ABN Amro in 2007 and subsequent state bailout.
RBS’s latest regulatory setback came as Mark McCombe, head of fund manager BlackRock’s Asian operations, ruled himself out of the running to succeed Hester, whose recently announced departure followed pressure from the government.
McCombe, who was seen as vying with about four other candidates to succed Hester, previously had a 20 year career with HSBC and was touted as a frontrunner for the RBS job.
But BlackRock spokesman Brian Beades said yesterday that McCombe had sent a note to his senior staff informing them that he had been contacted by the Scottish bank but had elected to remain with the company.
The bank hopes to be able to announce a new chief executive on or before its half-year results statement a week on Friday.
In its judgment, the FCA said RBS had breached the regulator’s rules on transaction reporting, showing inadequate management and controls. The FCA, which replaced the Financial Services Authority last spring, uses such data from the wholesale money markets, where banks access and trade money, to help spot abuses.
FCA director of enforcement and financial crime Tracey McDermott said: “Effective market surveillance depends on accurate and timely reporting of transactions. We have set out clear guidance on transaction reporting, backed up by extensive market monitoring, and we expect firms to get it right.
“As well as a financial penalty, firms can expect to incur the cost of re-submitting historically incorrect reports.”
The regulator said “the size of the fine reflects the serious nature of the issue”, and that RBS’s payout was reduced 30 per cent because it agreed to settle at an early stage.
The FCA added that problems with the bank’s systems were aggravated by its takeover of ABN Amro, but that it considered “given the resources available to RBS, it should have been able to overcome these challenges and ensure adequate controls were in place”.
Most of the bank’s errors involved assigning an incorrect reference code to trades, making it impossible for the watchdog to identify who was behind each one.
An RBS spokesman said the bank regretted the failings that were uncovered “and have subsequently made significant investments to our systems and controls in this area”.
The episode will be embarrassing for Hester as a a large number of the improper reporting happened while he was at the bailed-out bank’s helm after being parachuted in to replace the discredited Fred Goodwin’s regime in 2008.