THE Royal Bank of Scotland will not replace its chief executive of international and markets after the role’s incumbent, John Hourican, fell on his sword over the Libor fixing scandal.
Instead, the international and markets divisions will be split and their heads, respectively Peter Nielsen and John Owen, will each report directly to chief executive Stephen Hester.
The resulting structure of the previously combined investment bank removes a layer of management that “might have happened anyway”, a bank spokesman claimed.
The spokesman confirmed that Nielsen would be staying in his job “for now”, after speculation that Hourican and his number two, Nielsen, were in the frame to take the fall for failing to prevent rate setters colluding with traders to manipulate the bank’s submissions. It is thought the board fought to keep Nielsen after the bank’s head of global trading, Peter Rading, left the bank last month.
The spokesman said: “If all three went in a series of weeks, you’d risk serious destabilisation of the business. Nielsen is sticking around.”
Five current and former RBS directors will be grilled by the parliament’s commission on banking standards after the bank paid £390 million to settle charges that its investment banking arm manipulated Libor between 2006 and 2010.
US and UK regulators fined RBS, which is 82 per cent state-owned, for rate-rigging, with $325m (£205m) coming from the Commodity Futures Trading Commission and £87.5m from the Financial Services Authority. A unit of RBS agreed to plead guilty in a Department of Justice investigation and accepted a penalty of $150m (£95m). The investigations uncovered wrongdoing by 21 members of RBS staff – all of whom have either left the company or are subject to disciplinary proceedings.
On Friday it emerged that Hourican, Nielsen and the disgraced former chairman of RBS’s investment bank, Johnny Cameron, would be giving evidence to the committee chaired by Andrew Tyrie, in addition to RBS chairman Sir Philip Hampton and Hester.
It is thought that a replacement for Hourican would be difficult to recruit from outside the bank, with many suggesting the job is a “poisoned chalice”.
Although the board of RBS cleared Hourican of any involvement or knowledge of the manipulation of Libor at the bank’s London trading desks, Hampton confirmed at least one senior bank employee would have to be seen to take responsibility. It is thought the board faced pressure from Chancellor George Osborne to offer a scapegoat.
Irishman Hourican was drafted in after the bank’s near collapse and government bail-out to reform RBS’s investment bank.
He was charged with reducing the division’s balance sheet, which had ballooned and then collapsed under the management of Cameron, who was one of the first UK bankers to be publicly shamed and banned from taking on further roles in the City.
Since Hourican took it over in 2008, the I&M’s balance sheet has been chopped to less than half of its £1 trillion value at its peak. Hourican, who joined RBS almost 16 years ago, will leave the bank at the end of April. He will receive one year’s pay, but has been forced to give up close to £4m in bonuses previously granted that have not yet vested.