RBS battles to keep US pensions trade after Libor fixing

The Times Harry Wilson City Editor Published at 12:01AM, August 29 2015 


Royal Bank of Scotland is trying to avoid being banned from managing US pensions for a decade after admitting its role in the foreign exchange-rigging scandal earlier this year.

Lawyers for RBS were told last month by the US Labor Department that it had “tentatively decided not to propose” the granting of exemptions that would allow the bank to manage American retirement funds despite its guilty plea.

Although RBS has no US pension fund business, the government-backed lender was concerned that by not applying for the waivers it would lose the option of entering a potentially attractive sector until 2025 at the earliest.

The bank is one of three European financial institutions — along with Deutsche Bank and UBS — that have asked the American authorities for exemptions after admitting their guilt after a series of market manipulation investigations that uncovered evidence of attempts to rig borrowing rates and currencies.

At present the three will lose their Qualified Professional Asset Manager status, meaning that they can no longer look after the pension assets of US customers, indicating the increasingly tough approach being taken by regulators to wrongdoers. American and British regulators have faced criticism in recent years that banks have effectively been allowed to pay tens of billions of dollars in fines after admitting to serious malpractice, but then carry on with their business.

This has led to accusations of institutions being “too big to jail”, with the authorities fearful of the consequences of imposing tougher sanctions on businesses deemed to be of systemic importance to the global financial system.

RBS, Deutsche Bank and UBS are in the process of submitting new applications to the US Labor Department in the hope of ultimately obtaining the required exemptions. However, the department had already warned the banks in its letters last month that it did not believe their continued or future involvement in the US pension fund business would be in investors’ interests.

The period for RBS and the other banks to submit this information came to an end this week and they are awaiting the outcome.

Barclays has also applied for a waiver and is waiting to hear back. Citigroup and JP Morgan are also awaiting the result of their own applications. Any ban would be far more damaging for the US banks given their huge US businesses.

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