The chief executive of Royal Bank of Scotland has warned that the international investigation into foreign exchange trading could turn into a worse scandal than either the Libor interest-rate fixing or payment protection insurance (PPI) mis-selling cases.
Ross McEwan, speaking on a phone-in organised by the London radio station LBC, said: “We’re going through just millions and millions of emails, chat rooms, conversations, to see what actually went wrong, if anything, in this area here. And unfortunately I have the feeling that it is sort of a Libor case again.”
He added: “The difference this time is that we haven’t sat back and denied it. We’re doing the investigation hand in hand with the authorities. I’d like to see it cleaned up as quickly as we can.”
Asked directly whether it could be a bigger scandal than Libor or PPI he responded: “I don’t know at this stage. It’s not a small one.”
Attempts by former traders to fix Libor interest rates have seen RBS paying more than £700m in fines and penalties to regulators in the US, Europe and the UK. Its provisions to cover compensation for those customers mis-sold PPI have topped £3bn.
So far three foreign-exchange traders have been suspended by RBS, one of a number of banks to take such a step.
Mr McEwan’s acceptance that the forex affair could eclipse either PPI or Libor is privately reflected across large parts of the City, and echoes a warning made by the Bank of England’s Governor, Mark Carney, earlier this year.
The London based forex market is the world’s biggest, with a turnover of more than $5 trillion a day, and is used by a huge number of institutions. The investigation was triggered by allegations that traders had shared client data and sought to manipulate prices.
But progress has been slow as a result of the huge weight of material regulators are having to scrutinise, much of it couched in arcane and technical terms, by contrast to the Libor affair in which dealers wrote boastful missives in plain, and frequently low, English.
David Buik, a market commentator at Panmure, said: “The fact remains that, in my opinion, if there are any questions to be answered you are opening up the biggest can of worms that will put Libor and PPI in the shade.
“It’s not just the banks, but the domino effect on everyone who takes part: hedge funds, fund mangers, brokers. It really is a potential volcano.”
Mr McEwan also called for a proposed inquiry by the Competition and Markets Authority into current accounts and small business banking to be completed quickly.
Questioned about RBS’s global restructuring group (GRG), which was accused in a report by the government adviser Lawrence Tomlinson of seeking to profit by pushing potentially viable businesses to the wall, he denied any wrongdoing.
He pointed to a review by the law firm Clifford Chance which found no fraudulent activity, and added: “I have not seen malicious or fraudulent activity going on in this part of the business.”
A caller had earlier said they worked for a property firm that had met its loan repayments, but had been sent to GRG with the intent to put it into administration. Mr McEwan said he would look into the case but argued that many problems had been created for GRG by RBS saying yes to loans it should have turned down.