RBS Libor fall-guy tells MPs ‘Do not waste my death’

By MARTIN FLANAGAN
Published on 12/02/2013 00:00

THE Royal Bank of Scotland executive who fell on his sword for the Libor- rigging scandal pleaded yesterday for the company to clean up its act so that his gesture is not futile.

John Hourican, who is carrying the can for the affair as chief executive of RBS’s investment bank, told MPs: “I have told people who are prepared to listen that they shouldn’t waste my death.”

In his evidence to the Parliamentary Commission on Banking Standards, Hourican said: “It’s incredibly important that everyone in the company stands up and understands the anger that exists around the issue [of Libor manipulation].”

He said RBS’s management failed to spot the manipulation of benchmark interest rates by traders because it was focused on keeping the bank alive after the financial crash triggered its “cardiac arrest” and taxpayer bail-out in 2008.

But he admitted the bank was still slow in coming to grips with the scandal and tightening up controls after top executives became aware of it. “I’m very sorry it happened on my watch,” Hourican added.

Asked by MPs if the affair had badly damaged public confidence and trust in RBS, he replied: “Absolutely”. He said the fact that RBS was taxpayer funded made it even worse.

Peter Nielsen, head of RBS’s markets division, said the bank was unlikely to have made money out of the manipulation, though he also admitted it was too slow to respond. He said he had discussed resigning with Hourican, but decided to stay on.

Hourican said he believed stakeholders in RBS, including the taxpayer with an 83 per cent stake, were better served by RBS chief executive Stephen Hester and Nielsen staying on even though MPs queried how confidence could be retained in the latter when he was most directly responsible for the relevant business’s day-to-day working.

The Libor-fixing went on before and after the “old guard” were cleared out of RBS in 2008, and Nielsen admitted that “with hindsight” it was wrong to allow traders and Libor-submitters to sit next to each other and foster a potentially bad culture.

The Commission also interviewed Johnny Cameron, who ran RBS’s investment bank under disgraced former chief executive Fred Goodwin.

Cameron said the bank had attempted to impose ethical values on its traders but couldn’t control their behaviour.

“You can’t impose moral standards on those that don’t wish to be moral,” he said, adding Libor manipulation had not been seen as a potential danger for banks.

“It just didn’t occur to anyone that this was a rate that could be fiddled,” he said. Cameron added: “It’s as much about the culture of traders as the culture of any one bank. Traders need very tight, close management, and in the particular case of Libor the risk managers completely missed the point.”

RBS agreed to pay $612 million (£391m) to US and UK regulators last week to settle allegations it manipulated benchmark interest rates.

More than a dozen banks and brokerages, including JP Morgan Chase & Co, Deutsche Bank, and Citigroup, are being investigated by regulators over the manipulation of benchmark interest rates such as the London interbank offered rate, known as Libor, and Euribor, which have been used to price trillions of dollars’ worth of loans.