Ex-RBS trader says Brevan Howard sought Libor rate change

SINGAPORE Fri Mar 30, 2012 4:36pm BST

A logo of an Royal Bank of Scotland (RBS) is seen at a branch in London February 23, 2012. REUTERS/Stefan Wermuth

A logo of an Royal Bank of Scotland (RBS) is seen at a branch in London February 23, 2012.

Credit: Reuters/Stefan Wermuth

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SINGAPORE (Reuters) - Brevan Howard, one of Europe's largest hedge funds, asked Royal Bank of Scotland PLC (RBS.L) to change the Libor rate, a former trader for the British bank said in court documents filed in Singapore.

RBS said earlier this month that some of its staff were being investigated as a part of global probes into whether traders at banks tried to influence Libor lending rates, the benchmark for around $360 trillion (225.12 trillion pounds) in financial contracts.

Tan Chi Min, who was head of delta trading for RBS and based in Singapore, said in papers in a wrongful dismissal case that the fund telephoned the bank on August 20, 2007 and asked if they could change the bank's submission.

Banks submit their rates to Thomson Reuters which then calculates the Libor rate and distributes it on behalf of the British Bankers' Association.

"The defendant (RBS) received this request without objection," Tan said in the papers filed at Singapore's High Court on March 23.

Patricia Choo, an RBS spokeswoman in Singapore, declined to comment because the case is ongoing. Brevan Howard in Hong Kong and London declined to comment. The fund is not a named party in the court case and is not being sued for any wrongdoing.

Tan began legal proceedings against RBS for wrongful dismissal in December after he was fired for allegedly trying to improperly influence RBS's Libor rate setters between 2007 and 2011.

Tan alleged that it was in fact common practice among senior RBS employees to make requests to the bank's rate setters as to the appropriate Libor rate.

RBS filed a response to the court in January saying Tan was dismissed after being found guilty of gross misconduct. Delta trading is usually conducted by investment banks, using derivatives to track a basket of securities.

In the court papers, the bank said Tan had sought to improperly influence RBS's rate setters by communicating requests to have their Libor submissions set at particular levels in order to maximise his or the bank's trading book profits.

Tan said in a subsequent court filing that RBS was attempting to make a scapegoat of individual employees to deflect attention from the bank in relation to regulatory inquiries taking place into alleged manipulation of the LIBOR rate.

"The defendant's (RBS) consequent internal investigations were intended to create the impression that such conduct was the conduct not of the defendant itself, but the conduct of specific employees," papers filed by Tan on February 2 say.

The British Financial Services Authority, U.S. Securities and Exchange Commission, European Commission, the U.S. Department of Justice and the Japanese Financial Services Agency have approached banks around the world to investigate their involvement in determining Libor rates.

Earlier this month RBS said in its annual report that some of its staff were being investigated in these various probes, but that it has substantial defences to any claims that may arise as a result.

Reuters revealed in February that the U.S. Justice Department's probe of banks had become a criminal one.

Banks including Barclays (BARC.L), UBS (UBSN.VX), Deutsche Bank (DBKGn.DE), Lloyds Banking Group (LLOY.L) and HSBC (HSBA.L) have been named as defendants in a variety of class action complaints filed in the United States.

The Monetary Authority of Singapore said earlier this month that it had been asked by other regulators to help with their LIBOR investigations.

The series of investigations are examining whether banks misreported the rate at artificially low levels for years, either to project an illusion of strength in credit markets or to cash in on bets struck by their own traders on the direction of Libor.

The probe has prompted questions over whether there should be a root and branch reform of the way interbank borrowing rates are set.

On Wednesday the British Bankers' Association ruled out a "big bang" reform of the Libor interest rate, saying it favoured gradual change, although rules may be tightened for contributing banks after allegations the global benchmark had been manipulated.

(Clarifies process for setting Libor in paragraphs 3 and 4)

(Additional reporting by Nishant Kumar in Hong Kong and Laurence Fletcher in London; Editing by Neil Fullick)

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