Royal Bank of Scotland plc reaches Foreign Exchange settlements

The Royal Bank of Scotland plc ("RBS") has reached settlements with the United States Department of Justice (“DoJ”) and the Board of Governors of the Federal Reserve System (“Federal Reserve”) in relation to investigations into its Foreign Exchange (“FX”) business within its Corporate and Institutional Banking division.

RBS has agreed to enter a guilty plea pursuant to a plea agreement with the DoJ admitting that it knowingly, through one of its euro/U.S. dollar currency traders, joined and participated in a conspiracy to eliminate competition in the purchase and sale of the euro/U.S. dollar currency pair exchanged in the FX spot market in the United States and elsewhere, in violation of the Sherman Antitrust Act. The charged conspiracy continued from as early as December 2007 to at least January 2013. RBS is charged with participating in the conspiracy from as early as December 2007 until at least April 2010. The plea agreement is subject to approval of the federal court in Connecticut that is presiding over the matter.

RBS and RBS Securities Inc. have also entered into a cease and desist order with the Federal Reserve relating to defined FX activities and undertaken to submit enhanced plans, acceptable to the Federal Reserve, to comply with applicable U.S. laws and regulations with respect to these activities and certain of the market activities conducted within its Corporate and Institutional Banking division.

RBS will pay penalties of $395 million to the DoJ and $274 million to the Federal Reserve to resolve the investigations. As previously disclosed, RBS remains in discussions with governmental and regulatory authorities in other jurisdictions in relation to conduct within its FX business.

In addition, RBS and RBS Securities Inc. have reached an agreement to settle the consolidated antitrust class action brought on behalf of plaintiffs who entered into FX transactions with RBS or other defendant banks. The agreement is subject to execution of a final settlement agreement and approval of the federal court in New York that is presiding over the matter.

The DoJ and Federal Reserve fines, and the settlement amount in the consolidated antitrust class action litigation, are fully covered by existing provisions.

Philip Hampton, RBS Chairman, said:
“The RBS Board fully accepts the conclusions of today’s resolutions. We strongly condemn the actions of those responsible and regret the control failings that allowed such misconduct to take place.

“This episode has exposed serious shortcomings at both individual and collective levels from which we continue to learn. As part of this effort we are committed to implementing further improvements to systems and controls.

“We are continuing thorough investigations into the conduct of employees in this part of the business. As a result, we have dismissed three people and suspended two more pending further investigation. This work is on-going and will take into account the findings contained in these settlements.”

Ross McEwan, RBS Chief Executive, said:
“The serious misconduct that lies at the heart of today’s announcements has no place in the bank that I am building. Pleading guilty for such wrongdoing is another stark reminder of how badly this bank lost its way and how important it is for us to regain trust.

“To regain that trust we are putting the interests of our customers at the heart of this business and its culture. It has taken far longer than anyone hoped to root out all the past conduct problems and practices and as a result we still have significant challenges on the horizon.

“We are determined to learn the lessons from our past mistakes and to hold those responsible fully to account for their actions.”

Management and Board Actions

RBS has provided its full cooperation to regulators throughout the process. Since becoming aware of failings in the controls over parts of its FX business and improper conduct, RBS management has taken action to significantly improve culture, systems and controls.

RBS’s senior management has implemented a stronger governance and control framework within its Corporate and Institutional Banking division. Within this structure, a formal management committee, the Currencies Conduct and Remediation Committee, has been established with instruction to deliver customer and remediation improvements specifically within the FX business. Other internal governance and risk initiatives to date include further restrictions on messaging and chat rooms, banning mobile phones on trading floors, enhancing client disclosure around fix orders, and improving integrity and behaviour through strengthened surveillance and training. These reforms are being implemented in addition to a wider programme of cultural and remediation initiatives in RBS’s Corporate and Institutional Banking division that have been overseen by the Customer Standards Steering Committee (CSSC).

The CSSC was established in November 2014 to identify and deliver improvements to controls and business practices. It is responsible for delivering the improvements required by today’s settlements to internal controls, compliance and risk management systems.

RBS continues to undertake a thorough review of the conduct of current and former employees in its FX business within its Corporate and Institutional Banking division. The investigation has so far resulted in the dismissal of three employees with a further two suspended pending further investigation. When taking accountability decisions, RBS is also continuing to review the actions and responsibilities of the managers of the FX business and the Corporate and Institutional Banking division during the relevant period.

Today’s announcements will be taken into account in the on-going accountability and disciplinary process. In addition, the Group Performance and Remuneration Committee and senior management will take today’s announcements into consideration in relation to future remuneration decisions.  

What is RBS announcing today?

RBS has agreed to enter a guilty plea and pay a fine of $395 million (£261m) to the US Department of Justice (DoJ), and enter into a cease and desist order and pay a fine of $274 million (£176m) to the Board of Governors of the Federal Reserve System (Fed), to resolve investigations into misconduct in the FX market. In addition, RBS has reached agreement to settle RBS’s exposure in the consolidated antitrust class action brought on behalf of US based claimants who transacted in the FX spot market. The settlement remains subject to court approval.

Today’s announcements follow the settlements reached last year which were £217m with the FCA and $290m (£192m) with the CFTC.

What has RBS pleaded guilty to in the DoJ settlement?

RBS has agreed to enter a guilty plea pursuant to a plea agreement entered into with the DoJ admitting that it knowingly, through one of its euro/dollar currency traders, joined and participated in a conspiracy to eliminate competition in the purchase and sale of the U.S. dollar and euro currency pair exchanged in the foreign currency exchange spot market in the United States and elsewhere, in violation of the Sherman Antitrust Act. The charged conspiracy continued from as early as December 2007 to at least January 2013. RBS is charged with participating in the conspiracy from as early as January 2007 until at least April 2010. The plea agreement is subject to court approval.

Where can I find out more information?

The DoJ Plea Agreement will be available on its website: www.justice.gov. The Fed Cease and Desist Order will be available on its website: www.federalreserve.gov.

If you have any further queries, please contact the bank through the usual channels. Visit your local branch, call us, or speak to your Business or Private Manager.

What is RBS doing as a result of these findings?

The bank’s senior management has implemented a stronger governance and control framework in Corporate & Institutional Banking. In 2013 a formal management committee, the Currencies Conduct and Remediation Committee was established with instruction to deliver customer and remediation improvements specifically within the Foreign Exchange business. Reforms to date include further restrictions on messaging and chat rooms, banning mobile phones on trading floors, enhancing client disclosure around fix orders and improving integrity and behaviour through strengthened surveillance and training. These reforms are in addition to a wider programme of cultural and remediation initiatives in Corporate & Institutional Banking that have been overseen by the Customer Standards Steering Committee (CSSC).

How is RBS dealing with accountability?

RBS continues to undertake a thorough review of the conduct of current and former employees in its FX business within its Corporate & Institutional Banking division. The investigation has so far resulted in the dismissal of three employees with a further two suspended pending further investigation. When taking accountability decisions, RBS is also continuing to review the actions and responsibilities of the managers of the FX business and the Corporate & Institutional Banking division during the relevant period.

Today’s announcements will be taken into account in the on-going accountability and disciplinary process. In addition, the Group Performance and Remuneration Committee and senior management will take today’s announcements into consideration in relation to future remuneration decisions.