(Adds comments from CEO, context)
By Steve Slater
LONDON, July 18 An investigation into alleged
manipulation of foreign exchange markets could pose a bigger
problem for banks than the Libor interest rate rigging scandal,
the boss of Royal Bank of Scotland said on Friday.
RBS paid $612 million last year to settle allegations that
it manipulated Libor rates, one of several banks hit with big
fines for rigging financial benchmarks. Regulators are now
investigating allegations that traders manipulated key reference
rates in the $5 trillion-a-day foreign exchange market.
Asked if the FX investigation could be a bigger problem for
the industry than Libor, RBS Chief Executive Ross McEwan said:
"Unfortunately, it has the hallmarks".
McEwan, speaking on LBC radio, added: "We're still doing a
lot of investigation. We're going through just millions and
millions of emails, chatrooms, conversations to see what
actually went wrong, if anything, in this area.
"Unfortunately, I have the feeling that this is a sort of
Libor case again ... The difference this time is that we haven't
sat back and denied it. We've gone into it and are doing the
investigation hand-in-hand with the authorities."
McEwan said it was another problem from the past that banks
need to clean up to be able to move on. His bank has disclosed a
number of investigations but it could take until 2016 before
they are cleared, he said.
"There are a number of litigation and conduct issues that we
are still having to grapple with that will come out over the
next 18 months," McEwan said.
U.S. and European regulators have handed down about $6
billion in fines to 10 banks and brokerages, including UBS
, Barclays and Deutsche Bank for
alleged rigging of Libor and its euro cousin Euribor, and more
banks are expected to be hit.
The industry is striving to take steps to reform currency
benchmarks and show it is cleaning up its act, and a blueprint
for change was laid out by the Financial Stability Board earlier
But a number of industry analysts have said the combination
of fines from investigations in more than half a dozen
jurisdictions worldwide, and the potential for suits by fund
managers and other investors, could saddle banks with a bill
several times costlier than Libor.
Benchmark foreign exchange rates are used to set the value
of trillions of dollars of investments and regulators are
looking at whether traders at some of the world's biggest banks
colluded to manipulate the rates.
Martin Wheatley, chief executive of Britain's Financial
Conduct Authority, said earlier this year allegations about FX
wrongdoing were "every bit as bad as they have been with Libor".
(Additional reporting by Patick Graham; Editing by Tom Pfeiffer
and David Holmes)