RBS: The embarrassing transcripts

The transcripts shine a light into the murky dealings at the RBS trading desk

The latest fines imposed on a bank for the Libor-rigging scandal have produced another crop of embarrassing emails, messages and recorded telephone calls.

This time it is the traders of Royal Bank of Scotland who find the private scheming exposed to the public gaze.

Below are a selection of the conversations - most of them via Bloomberg's instant messaging system - that have been published by the Commodity Futures Trading Commission, one of the US financial regulators - and an explanation of what they mean.

The emphasis is added by the BBC. The spelling and grammar is as per the original communications.

The market is a cartel - 20 August 2007

Senior RBS Yen Trader: this libor setting is getting nutss

Trader at Second Bank: im puzzled as to why 3m libor fixing not coming off after the FED action

Normally interest rates react to interventions by the US central bank, the Federal Reserve.

Trader at Third Bank: [UBS] is lending doll[ar]s through my currencies in 3 month do u see him doing the same in urs

Senior RBS Yen Trader: yes[,] he always led usd in my mkt[,] the jpy libor is a cartel now

This refers to the setting of Japanese yen interest rates in London.

Senior RBS Yen Trader: its just amazing how libor fixing can make you that much money

Senior RBS Yen Trader: its a cartel now in london[.] they smack all the 1yr irs ..and fix it very high or low

Have we been rumbled? - 2 April 2008

Senior Yen Trader: nice libor[.] our 6m fixing move the entire fixing[.] hahahah

In other words, the six-month borrowing rate RBS submitted managed to influence the Libor rate for the day.

Yen Trader: the BBA called to ask me about that today

The British Bankers' Association is the industry body that calculates the Libor rates based on the borrowing rates submitted to it by London-based banks, including RBS.

Senior Yen Trader: really?

Yen Trader: yes

Senior Yen Trader: they complain?

Yen Trader: asked to speak to me about the low 6m rate

Yen Trader: no[,] just to make sure i was happy with it

Senior Yen Trader: i think some banks must have complain

Yen Trader: he called b4 any of the other banks saw our data[,] at about 11.15[,] to check it was ok

Senior Yen Trader: oh then its fine

Yen Trader: before publishing

Senior Yen Trader: i am sure some HF [hedge fund] will complain tomorrow ..

Yen Trader: tough

Senior Yen Trader: we will say we lower every tenor ..1m 3m 6m ..we feel rbs name has very good credit ..no problem getting money in

Senior Yen Trader: good way to boost share price!

The conversation occurred during the credit crunch in the early days of the financial crisis. At this time, investors were looking closely at the interest rate that banks had to pay in order to borrow money, as an indicator of whether markets still had confidence in them. Lowering RBS's Libor submissions would therefore create the false impression that RBS was in a stronger position than it really was.

Sweet-talking trader - 4 December 2008

Swiss Franc Trader: can u put 6m swiss libor in low pls?

Primary Submitter: NO

The submitter's job is to tell the BBA what RBS's borrowing cost for the day is. This submission is then used by the BBA, along with all the other banks' submissions, to calculate the day's Libor rate.

Swiss Franc Trader: should have pushed the door harder

Primary Submitter: Whats it worth

Swiss Franc Trader: ive got some sushi rolls from yesterday?

Primary Submitter: ok low 6m , just for u

Swiss Franc Trader: wooooooohooooooo[,] 0.01%? thatd be awesome

Primary Submitter: 1.33

Swiss Franc Trader: perfect[.] u r a nice man

Persistence pays off - 30 January 2009

Swiss Franc Trader: high 3m libors pls!!!!!!

Primary Submitter: 0.50??

Primary Submitter: 0.51

Primary Submitter: 0.52

Primary Submitter: 0.53

Swiss Franc Trader: 0.54

The Swiss Franc Trader then repeats the request seven more times, without getting a response

Swiss Franc Trader: and low 6m

Primary Submitter: Ok i get ya

Swiss Franc Trader: 0.65

Repeats three more times

Primary Submitter: ok

Primary Submitter: libors as requested

Swiss Franc Trader: you a top dog

An offer that surely could not be refused - 5 May 2009

Swiss Franc Trader: [Primary Submitter] pls can we get super high 3m[,] super low 6m

Swiss Franc Trader: PRETTY PLEASE!

Primary Submitter: 41 & 51

Swiss Franc Trader: if u did that[,] i would lvoe [sic] u forever

Primary Submitter: 41 & 55 then …

Swiss Franc Trader: if u did that i would come over there and make love to you[,] your choice

Primary Submitter: 41+51 it is

Swiss Franc Trader: thouht [sic] so

Primary Submitter: so shallow

A long list of conspirators - 26 June 2009

Interdealer Broker: Hello mate, [Yen Trader]? You all set?

The broker is not an RBS employee. His or her job is to help set up large transactions big banks such as RBS, as well as big investors, while protecting their anonymity and details of their transaction, so that other traders cannot manipulate the market against them. Brokers typically earn a percentage fee on the transactions they facilitate.

Yen Trader: Yeah.

Interdealer Broker: Right listen we've had a couple of words with them, you want them lower right?

Yen Trader: Yeah.

Interdealer Broker: Alright okay, alright listen, we've had a couple words with them. You want them lower, right?

Yen Trader: Yeah.

Interdealer Broker: Alright okay, alright, no we're okay just confirming it. We've, so far we've spoke to [unnamed bank]. We've spoke to a couple of people so we'll see where they come in alright. We've spoke, basically one second, basically we spoke to [unnamed bank], [unnamed bank], [unnamed bank], who else did I speak to? [Unnamed bank]. There's a couple of other people that the boys have spoke to but as a team we've basically said we want a bit lower so we'll see where they come in alright?

The broker lists the names of four other major banks in total. The names have been censored by the US regulators. It is worth noting that these four banks do not include UBS, whose name has not been censored in the transcripts. Throughout all the transcripts, nine separate anonymous banks are alluded to besides RBS and UBS.

Yen Trader: Cheers.

Interdealer Broker: Cheers no worries mate.

Payment in kind - 19 September 2008

Interdealer Broker: can you do me a favour … you're not going to get paid any bro for this and we'll send you lunch around for the whole desk. Can you flat…can you switch two years semi at 5 3/4 , 100 yards [meaning 100 billion] … between UBS. Just get … take it from UBS, give it back to UBS. He wants to pay some bro. We won't bro you…

The broker is asking the RBS trader to help set up a "wash trade" so that the UBS trader can pay the broker some fees ("bro") in return for some unnamed illicit favour provided by the broker. In the wash trade, UBS will sell something to RBS, and then buy it straight back from RBS again. The trades are totally fatuous, as they will cancel each other out. The broker will arrange the trade, charging UBS fees along the way. The broker is telling the RBS trader that they won't get the benefit of any of the brokerage commission, but is offering instead to compensate them for the favour by paying for lunch to be delivered to all the RBS traders.

Yen Trader: Yeah, yeah

Interdealer Broker: Yeah. Yeah. 100 yards … actually can you make it 150 and I'll send lunch around for everybody?

Yen Trader: Yeah.

Interdealer Broker: Thanks very much. Cheers. Cheers, mate and you choose lunch.

Out of the frying pan... - 24 November 2010

An initial conversation occurs via Bloomberg instant messaging:

Senior Yen Trader: was wondering if it suits you guys on hiking up 1bp on the 6mth Libor in JPY ... it will help our position tremendously

Primary Submitter: how you doing with all the volatilities these days? ... to be honest happy with levels we see at the moment

Senior Yen Trader: ok no prob ... wouldn't want to cause any problem ... thanks mate

The Libor submitter makes clear that he or she will not play ball. They take up the subject again later on over the telephone:

Senior Yen Trader: Hello?

Primary Submitter: Morning, [Senior Yen Trader]? Hi, [Primary Submitter].

Senior Yen Trader: Yeah, how are you?

Primary Submitter: I'm pretty good sir. Very Good. We're just not, we're not allowed to have those conversations on [instant messages].

Senior Yen Trader: Oh, sorry about that. I didn't know.

Primary Submitter: (laughter)

Senior Yen Trader: (laughter) Oh because of the, the BBA thing?

The previous year, the British Bankers' Association had laid down new guidelines about how banks should submit their Libor rates, in order to ensure that they were not influenced by traders.

Primary Submitter: Yes, exactly.

Senior Yen Trader: Ah, ok ok.

Primary Submitter: So yeah, leave it with me, and uh, it won't be a problem.

Senior Yen Trader: Ok, great.

Unfortunately the pair seemed to have forgotten that all calls made over the traders' telephone lines are recorded by the bank, and the call transcripts can be subpoenaed by the regulators.