The Royal Bank of Scotland (RBS) has been fined £5,620,300 by the Financial Conduct Authority (FCA) for incorrectly reporting transactions they made in wholesale markets, and in some instances, failing to report transactions at all.
RBS failed to properly report 44.8 million transactions between November 2007 and February 2013; and failed altogether to report 804,000 transactions between November 2007 and February 2012. This represents 37% of relevant transactions carried out by RBS in this period, and breaches FCA rules on transaction reporting and its requirements for firms to have adequate management and controls.
Many of the problems with RBS’ own systems were compounded by the takeover of ABN Amro Bank N.V. in October 2007. The FCA considers that, given the considerable resources available to RBS, it should have been able to overcome these challenges and ensure adequate systems and controls were in place.
Tracey McDermott, the FCA’s director of enforcement and financial crime, said:
''Effective market surveillance depends on accurate and timely reporting of transactions. We have set out clear guidance on transaction reporting, backed up by extensive market monitoring, and we expect firms to get it right. As well as a financial penalty, firms can expect to incur the cost of resubmitting historically incorrect reports. We will continue to take appropriate action against any firm that fails to meet our requirements.''
The FCA’s overall objective is to ensure that markets function well. Accurate and complete transaction reporting by firms is an essential tool in delivering this objective. The FCA uses these reports in a number of ways – including identifying and investigating suspected market abuse, for example insider trading and market manipulation. Where the FCA sees any evidence of firms not acting properly it will not hesitate to act.
These failures are particularly concerning because the FCA already provides extensive guidance to firms on how to submit and check these reports, and has taken action against seven firms, including Barclays and Credit Suisse, for similar reporting errors. The size of the fine reflects the serious nature of the issue. RBS agreed to settle at an early stage of the investigation, and received a 30% reduction of their fine.
Notes to Editors
- A transaction report is a set of information relating to an individual transaction carried out on a financial market. It includes identifiers of the financial instrument, the firm that undertook the transaction, the counterparty to the transaction and other characteristics such as the buy/sell identifier, price and quantity.
- Most of the errors involved using an incorrect reference code which made it impossible for the FCA systems to identify the counterparties to a transaction. Other inaccuracies included using the wrong timestamp, firm reference number or venue; incorrect prices; duplicate reporting; incorrect identifier for ‘over the counter’ (OTC) derivatives; and incorrect description for OTC derivatives.
- Without this discount, the fine would have been £8,029,100. More about our approach to setting fines is available on our website.
- Read the RBS Final Notice and Market Watch Issue 43 (October 2012)
- On 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- You can find more information about the FCA, as well as how it is different to the PRA.