Royal Bank of Scotland Group Plc’s Japan brokerage unit head is preparing to step down as the company faces punishment for attempts to rig benchmark interest rates, said two people with knowledge of the situation.
RBS Securities Japan Ltd. Chief Executive Officer Ryusuke Otani will leave the firm as soon as today, one of the people said, asking not to be named as the information is private. The Financial Services Agency will announce penalties including a business improvement order as early as today, the people said.
The agency oversees the Securities and Exchange Surveillance Commission, which on April 5 recommended action against RBS. The unit in February pleaded guilty to wire fraud as part of a $612 million settlement with the U.K. and U.S. for manipulating the London interbank offered rate, the benchmark for at least $300 trillion of securities worldwide.
Atsuko Yoshitsugu, a Tokyo-based spokeswoman for RBS, said Otani wasn’t available to comment as he is on “compliance leave.” Hiroshi Okada, an FSA spokesman, declined to comment.
From around mid-2006 to early 2010, an unidentified RBS trader and his colleagues asked employees responsible for making yen Libor submissions to change them to favor their derivatives portfolio, the SESC said in a statement last week. The conduct was “seriously unjust and malicious,” it said.
The Edinburgh-based lender apologized to customers following the SESC recommendation, saying it will take “appropriate steps” to address the issues raised. More than a dozen banks and brokers are being probed around the world for manipulating benchmarks including Libor, with Barclays Plc and UBS AG also paying fines as part of regulatory settlements.
Otani, who became Japan representative of the brokerage in 2007, wouldn’t be the first top executive of a foreign bank to resign following interest-rate breaches in the country. Citigroup Inc.’s Japan brokerage head, Brian Mccappin, stepped down in January 2012 after the SESC found that employees of the unit tried to manipulate benchmark rates.
The FSA banned New York-based Citigroup from trading tied to Libor and the Tokyo interbank offered rate for two weeks. Zurich-based UBS received a one-week suspension at the time for similar breaches.
RBS, 81 percent owned by British taxpayers after getting the world’s biggest bank bailout during the global financial crisis, said in February it had dismissed six individuals from the bank for Libor-related misconduct. A seventh, Simon Green, who traded derivativestied to short-term moves in interest rates in dollars and euros, was fired last month, two people with knowledge of the move said.
Lloyds Banking Group Plc, the second-largest U.K. government-owned lender, is probing two money-markets traders over their alleged role in rigging rates, three people familiar with the matter said.
Libor is determined by a daily poll that asks banks to estimate how much it would cost them to borrow from each other for different time-frames and in different currencies. The top and bottom quartiles are excluded and an average is taken of the remaining quotes.