[SINGAPORE] A lawsuit by a former division head has cast the spotlight on the Royal Bank of Scotland's (RBS) practices in setting the London Interbank Offered Rate (Libor).
Tan Chi Min, former head of RBS's global banking and marketing division in Singapore, sued the bank in the High Court, alleging he was wrongfully fired for alleged gross misconduct related to the setting of Libor for the Japanese yen, in order to deflect the bank's responsibility over the Libor affair.
He is seeking to recover bonuses amounting to S$747,533 and 71 million yen (S$xx million), and 3.3 million RBS shares.
RBS, along with UBS, Lloyds Banking Group and Deutsche Bank, is being investigated by regulators in Europe, Asia and the US over their role in setting the Libor.
Coming in the wake of the widening Libor rigging scandal, Mr Tan's action has also raised questions about how Singapore Swap Offer Rates (SOR) are fixed by the bank.
In court documents last week, Mr Tan alleged RBS omitted critical information from records of a disciplinary hearing in September 2011 that allegedly showed the bank "condoned the practice of making requests of (its Libor) rate setters" and which also raised questions over its practices relating to the setting of SOR.
According to Mr Tan, the minutes allegedly failed to reflect the fact that he had referred to an extract where an RBS trader had referred to the setting of the Singapore SOR.
Last month, the Monetary Authority of Singapore (MAS) ordered banks in Singapore to review the way the Singapore Interbank Offered Rate (Sibor) and the SOR - two main benchmarks used to determine mortgage loans in Singapore - are set, as regulators worldwide step up investigations of more than a dozen banks in the United States, Britain and Japan over allegations of interbank rate manipulation.
RBS, which had informed the Association of Banks in Singapore (ABS) in April that it would stop contributing to the setting of Sibor with effect from May 31, told BT yesterday that it will still cooperate with MAS on the review.
RBS also said it will continue to "cooperate fully with ongoing investigations relating to the setting of Libor and other interest rates".
An RBS spokeswoman said Mr Tan's lawsuit was not a factor in its decision to quit its role in setting Sibor.
In January, the bank had announced that decision was the result of a global strategic business review. "During the course of this review, we have decided to withdraw from some interbank rate setting panels, but we remain committed to those markets. This included a decision to end our contribution to the rate setting panel for Sibor in Singapore," she said.
Mr Tan, who is represented by Suresh Nair and N Sreenivasan of Straits Law Practice LLC, said the minutes of his disciplinary hearing failed to reflect that he had raised the issue of RBS's "internal procedure in London" about setting Libor.
He said the minutes failed to reflect discussions relating to a Bloomberg chat on March 27, 2008, in which a former RBS manager had reported that a junior trader had been asked to "put (Libor) low".
RBS, in its defence papers, however, said it was entitled to fire Mr Tan because he was guilty of "gross misconduct", and had tried to improperly influence RBS's rate setters from 2007 to 2011 to submit Libor rates at particular levels to boost profits.
But Mr Tan argued "the practice of making requests to rate setters was common ... and known to the bank's management." In fact, input or views on various short term interbank rates including SOR, Yen Tibor (Tokyo interbank offer rate), Yen and USD Libor, were provided either orally or in writing by many of RBS's traders and managers to various interest rate setting bodies, he said.
In court documents, Mr Tan noted that another former RBS Swiss franc trader, was terminated allegedly for "improperly (seeking) to influence the rate setter."
Citing the bank's interim results released on Aug 3, the RBS spokeswoman confirmed that it has "dismissed a number of employees for misconduct as a result of its investigations into the setting of LIBOR and other interest rates."
But she declined to specify the number of employees who were terminated.
Mr Tan also claimed RBS, one of 16 that help the British Bankers' Association set Libor rates, failed to detail the allegations against him, or state precisely what policy, rule or law he allegedly breached that amounted to improper influence of the bank's rate setter.
But RBS disagreed, citing an Aug 29, 2011, letter it says is "fully compliant with the procedure set out in the Disciplinary Policy and provides details" of its allegations against Mr Tan.
RBS, in court documents, said Mr Tan's duties and the standards required of him in discharging those duties are set out in RBS's employment contract and Code of Conduct.
"We consider that your contribution to such communications is evidence of potential wrongdoing by you, which the bank considers could amount to gross misconduct under the bank's disciplinary policy," RBS said in the Aug 29 letter.
But Mr Tan disagreed, saying RBS failed to properly investigate allegations against him prior to launching formal disciplinary proceedings. For instance, RBS's disciplinary manager appeared to be unaware of the "fraud theft and dishonesty" allegations against Mr Tan in the Aug 29 letter, he said.