Hong Kong Financial Regulator Slams RBS for Internal Control Failures

The Securities and Futures Commission, Hong Kong’s main financial watchdog, issued a financial penalty to global banking giant, RBS. The

SFC_sHong Kong’s financial regulator that authorises financial and capital markets reported that it issued a reprimand and monetary penalty to The Royal Bank of Scotland, one of the UK’s largest banking institutes.

The regulator had breached a number of principles relating to unauthorised trading and its Emerging market rates business. The move comes on the back of serious investigations by regulators across developed countries into the manipulation of rates such as LIBOR and FX crosses.

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The Order comes after a detailed investigation by the Securities and Futures Commission (SFC), was carried in 2011 after the watchdog discovered unauthorised trading by one of its traders, Ms Shirlina Tsang Pui Yu.

Details in the official report show that the initial investigation took place on Saturday the 15th of October. When handing out the penalty, the regulator appreciated RBS’s support and assistance.

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Mark Steward, the SFC’s Executive Director of Enforcement states in the press briefing: “RBS acted quickly in alerting the SFC on a Saturday afternoon which in turn led to action being taken that prevented Tsang from leaving Hong Kong. This deserves substantial credit and is the reason why today’s sanctions are not heavier ones.”

Ms Tsang is believed to have made a number of errors during the three-year period in question. A major flaw was the mismarking of positions in Hong Kong Government debt instruments this includes Hong Kong Government bonds, exchange funded notes and exchange funded bills, breaching futures trading limits and the mismarking of the HK$ 1 month interest rate swap curve.

The three-year ordeal resulted in the bank facing a loss of over $40 million. The SFC found a number of discrepancies and failures in the way RBS managed its training operations. Tsang was found guilty in 2013 and sentenced to four years in prison. In a bid to conceal her losses Tsang cancelled and amended fictitious bonds and futures trades in RBS’s internal systems.

Mark Steward
Mark Steward

The LIBOR and FX probes cases have shocked the financial trading environment in Europe and the USA. A number of traders have been suspended as banks investigate the alleged mishap. The UK’s central bank reported that during its investigation of the matter, it suspended members of its staff. The case continues as regulators and governments pursue their findings.

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