Bank sacks staff over Libor scandal

City Editor

Saturday 4 August 2012

ROYAL Bank of Scotland chief executive Stephen Hester blamed the cultural and structural flaws of the "go-go years" of the pre-credit crunch boom as the company confirmed it has sacked employees over Libor rate-fixing scandal.

LOOKING AHEAD: Chief executive Hester wants to move away from the pre-crisis 'go-go years'. Picture: Oli Scarff

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TIM SHARP CITY EDITOR

Former Standard Life chief executive Sir Sandy Crombie, now RBS's senior independent director, is conducting a review of the culture and values at the bank.

Part-nationalised RBS posted a first-half operating profit of £1.83 billion, down from £1.97bn in the same period last year, which investors took as a sign of resilience. Shares rose 11.5p to 216p.

The profits came after a £125 million provision for costs relating to last month's IT problems and a £50m for interest rate swap mis-selling. But the number excluded an additional £260m charge for Payment Protection Insurance mis-selling over the period to take the bank's provision to £1.3bn.RBS made a statutory pre-tax loss of £1.5bn, which included a £2.9bn accounting loss due to a rise in the value of its own debt, against a £794m deficit a year earlier.Income was £13.3bn, down 8.2% on last year as the 82% state-owned lender shrank its balance sheet.Mr Hester said: "Profits will be higher when there is economic recovery. It is understandable and right that our fortunes are tied to those of the customers in the bank and if they are feeling the pinch, then we will feel the pinch."He said that three years into its five-year recovery plan "the worst is behind us".RBS said it was co-operating with investigations in the UK, US, Canada, Europe and Japan into its submissions and procedures around the setting of Libor and other inter-bank lending rates. Barclays has already been fined £290m by regulators.Mr Hester said: "Even if we are taking about the actions of a relatively small number of people, the industry has a broad pattern of incidents where people put the company and themselves first and their customers second. "That is the cultural and structural flaws of the industry in the go-go years pre-crisis."RBS fired four traders last year for misconduct in connection with the Libor affair and is facing a legal fight with one of them who is seeking to recoup withheld bonuses.Mr Hester admitted that the reputation of the banking sector had fallen to new lows, adding: "This is dangerous because customer trust is a prerequisite for a successful banking sector and an effective banking sector is so important to economic stability and growth." RBS said a deal to sell Spain's Santander 318 branches, including 11 NatWest outlets in Scotland, was now not expected to complete until well into 2013.Asked if the £1.65bn price would fall, Mr Hester said: "It is hard to know where that ends up."Banking valuations have fallen in recent months and Lloyds recently lowered the price for 318 branches it is selling to Co-operative Group.The sale of the RBS portfolio has been demanded by European competition officials after the bank's £45bn taxpayer bail-out in 2008. It has also been told to offload its Direct Line insurance arm.RBS confirmed it was seeking an initial listing of Direct Line in October "subject to market conditions".Mr Hester said: "If market conditions are not right or opportunities are better elsewhere, we are able to wait."Direct Line has seen an extra £40m of claims after the wet weather of recent months.But it still saw operating profits rise 6% year-on-year to £219m.Mr Hester said the bank could exit the asset protection scheme – which insures £300bn of its most toxic assets – later this year, after paying £2.5bn in charges. The bank looks increasingly unlikely to draw on the scheme.

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Bank sacks staff over Libor scandal

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