FCA bans ex-RBS LIBOR Submitter for involvement in rigging rates. But its reasoning is questionable.

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FCA bans ex-RBS LIBOR Submitter for involvement in rigging rates. But its reasoning is questionable.

Published 28 April 2016

This month the FCA published its Final Notice banning Mr Paul White ("Mr White"), a former LIBOR Submitter and trader at RBS, from working in the financial industry for submitting false Libor rates at the request of traders. Had it not been for Mr White's reduced financial circumstances, the FCA would have imposed a financial penalty of £250,000. 


This case arose from the banking scandal that emerged in 2012 following FCA investigations into traders at RBS, Barclays and other banks who had sought to manipulate Libor rates during the financial crisis. In 2013 the FCA imposed a fine of £87.5m against RBS for significant failings in relation to Libor. The FCA Final Notice describes, among other breaches, how RBS breached Principle 5, which provides that a firm must observe proper standards of market conduct. The FCA subsequently decided to take action against Mr White a trader for RBS, because it considered that he was "knowingly concerned" in RBS's breach. 

Mr White was a primary submitter for Japanese Yen and Swiss Franc Libor at RBS throughout the relevant period from 8 March 2007 and 24 November 2010. During this time, Mr White received 68 documented communications from RBS derivatives traders and an external trader, for submissions that would benefit their own trading positions. Mr White appeared on the face of the communications to take these requests into account.

Although these exchanges gave the appearance that Mr White took traders' requests into account, Mr White's position was that he only submitted rates he believed to be correct, and in accordance with the definition of Libor as he understood it to be. He saw no harm in letting the traders believe he was acting on their requests and doing them a favour.

The FCA decision

The FCA did not believe Mr White's explanation of his actions. A number of his arguments were made only before the RDC and not when he was initially interviewed by the FCA, or in internal disciplinary interviews conducted by RBS. There is some force, therefore, in the FCA's position, as this state of affairs gives rise to questions as to the credibility of Mr White's position. However, the basis upon which the FCA has reached its decision is curious.


The FCA found that Mr White knew trading positions were not a relevant factor under the LIBOR definition, that he understood the full LIBOR submission process, that he routinely took the trading position of derivative trader into account and that, as a result, as an approved person, (who must act with integrity), he failed to do so and his behaviour was contrary to property standards of market behaviour.

However, the FCA accepted Mr White had not been given proper training or instruction on LIBOR submissions. It further accepted that inappropriate requests, and taking into account trading positions was widespread and conducted openly at RBS.  The FCA further accepted it could not prove that Mr White, in fact, submitted incorrect rates and that the evidence it did rely on, namely the communications with traders, was not always consistent with the submissions made on all days in question.

Notwithstanding these factors, the FCA said that Mr White:

  • "Deliberately closed his mind to the risk that his behaviour was contrary to proper standards of market conduct";
  • "Deliberately closed his mind to the risk that his behaviour was contrary to proper standards of market behaviour, and so acted recklessly";
  • "Although Mr White did not know that his behaviour was contrary to proper standards of market conduct, he deliberately closed his mind to the risk that it was".

These findings as to Mr White's state of mind appear contradictory. The FCA accepts that Mr White did not know what he was doing was wrong, but it says that the reason why he did not know was because he "deliberately closed his mind to the risk that it was" wrong. At no point does the FCA explain what it means by saying Mr White "deliberately closed his mind". "Deliberately" denotes something done consciously or intentionally in a careful and considered way, unhurried, fully considered and not impulsive. It is indicative of something done with careful consideration. 

It is, therefore, difficult to reconcile the findings that Mr White did not know that what he was doing was wrong with the contention that he had 'deliberately' and, thus, carefully considered closing his mind to that possibility or the risk that what he was doing was contrary to proper standards of market conduct. This reasoning appears to make little sense. Further, it would also appear inconsistent with a finding that Mr White had acted recklessly as that requires some level of knowledge of a risk, but going ahead regardless and the FCA accept he didn't know what the risk was, because he had deliberately closed his mind to it.

The findings by the FCA as to Mr White's state of mind could be considered as unhelpful in assisting the FCA to demonstrate to those that it regulates that they will receive a fair hearing. The FCA admittedly places substantive reliance on what the communications between traders looked like without, it seems, being open to the possibility that there are other explanations in circumstances where the FCA cannot track the alleged conduct to an actual consequence or loss. This is an unsatisfactory position when the FCA's decisions lead to pressure on the criminal authorities to pursue prosecutions, or face criticism when they don't.

For now, however, the FCA's position is clear. The message from the decision has been reinforced by the FCA's director of enforcement and market oversight, Mark Steward. Mr Steward is reported as saying: "This ban should reinforce the message that working in financial markets entails obligations and responsibilities and that serious failures will result in substantial penalties including fines and prohibitions". The FCA needs, however, to think carefully how its published decisions are perceived where they appear, as here, to be based on questionable reasoning.


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