16.16 The RBS execs say there were no whistleblowers. But instead of a whistleblowing culture, Hourican wants a culture where people hold each other to a higher level of moral account.
16.13 Welby asks how do you test for the moral culture of a trading floor? Johnny Cameron answers:
That’s straying into philosophical territory. I do think that traders have a particular approach to life and need much tighter controls. By and large, those controls are imposed. What happened in this case that the risk managers didn’t recognise this as a risk, those controls were not there… The risk controls are designed and should protect bank against traders’ misbehaviour.
He adds that risk controls do recognise that traders could misbehave, but no one envisaged that Libor could be fiddled by a cartel across many banks.
16.08 Justin Welby, the new archbishop of Canterbury, asks Hourican whether the investment bank was too large. He agrees, saying it had engaged in “strategic tourism”, and points out that RBS closed 14 of the 52 country divisions.
16.03 Hourican adds that that RBS “shouldn’t waste my death”. “It is incredibly important that [the] company stands up and feels anger that exists around issue and industry and around our company,” he says.
16.02 Nielsen is asked for assurances that this failure will not be repeated. He says:
I wake up every single day and attempt to make sure that’s the case. Nothing in this world is 100pc certain. If I can just add to what John describing in terms of what we went through in 09, 10, that story stops in 2010. In 2011, I think the record shows that we made a great deal of progress on a number of more cultural, attitiduinal issues that have been brought out of probes and we have, management have, I have, taken those to heart.
There is nothing that is more important to myself and that team. Holding the mirror up, for those two years – 2009 and 2010 – we focsued on the things that broke the bank. This bank went broke – funding failures, market risk failures, it couldn’t calibrate, it couldn’t count. Fixing that, occupied everything, not just front line.
If we had that to do over again, take 10pc of that effort on getting arms around that risk and focusing on cultural and attitudinal aspects, we’d be in better shape.
15.56 Nielsen concedes that the bank had acted too slowly, but that RBS acquitted itself better when it came to dealing with problems found in the yen and Swiss franc – that it dealt with those issues extraordinarly expeditiously.
15.55 Some Twitter reaction so far to this hearing:
15.50 Hourican and Nielsen are asked when they first knew about the misconduct. Both say they were made aware when the CFTC issued its notice in April 2010.
15.47 Hourican is asked about wash trades and the fact that it took the FSA to detect them. He concedes they did fail to pick up wash trades. But, he maintains there is no evidence that anyone other than the 21 people identified were aware of these activities.
15.43 Hourican says that when they took control of the bank, it had effectively had a cardiac arrest and that steps were taken such as stabilising the customer base, selling and closing businesses and taking half a trillion off the balance sheet.
15.38 Cameron says that almost every bank in world, if reports are to be believed, have been involved in some way. One possible observation could be that is as much about culture of traders as it is of any one bank. Traders are more similar across bank than alike to others within banks. Bankers are totally different, he adds.
15.36 Johnny Cameron says that he tried to establish a tone of high ethical standards at the bank. “It’s shattering to us,” he says. But you can’t impose moral standards on people who don’t wish to be moral, he adds.
15.35 It is asked whether none of management was aware of what was going on day in, day out on the trading floor. Nielsen points out that while there were very serious issues in submissions for Japanese Yen and Swiss francs, there were not issues in larger currencies. He says that supervisors should have known whether traders were submitting favourable submissions, but concedes that there should have been more senior monitoring of these supervisors. When asked what risk control were doing, he adds that – mistakenly – this area wasn’t viewed as a risk.
15.30 Nielsen confirms that traders rigging Libor were motivated by personal profit.
15.28 Nielsen is asked about how much money RBS made from Libor rigging. He says that examination is still taking place but the effect of “reprehensible” rate rigging on the profit and loss account of the rates business could be minimal. Some of the “errant” requests may have benefited one trader’s portfolio at the expense of another, he adds.
15.20 Hourican says he spent a lot of time thinking about his decision and felt it was the right thing for the bank and all of our stakeholders was that he would take responsibility for this issue. He says he’s sorry it happened on our watch.
15.17 Nielsen and Hourican say they both talked about resigning. Nielsen says they’ve accomplished a great deal since attempting to right bank and has appreciated playing a part in that. Hourican says he accepted responsibility for Libor failings.
15.15 John Hourican is asked about the statement he made when his departure was announced. He’s asked if he agrees whether it’s true that the actions surrounding Libor have brought shame on the bank. He agrees and agrees too that the reputational damage is considerable.
15.10 But first, there’s clarification of people’s roles and timelines at RBS.
15.07 We’ve got some questions on Libor first.
15.05 Looks like we’ll be starting any minute. The commission has arrived. You can find details of its members here.
14.54 Steve Hawkes, Business Editor at The Sun, points out that the Pope’s departure will have also had politicians busily rewriting their questions for the RBS bosses:
14.48 This afternoon’s hearing has been more than a little upstaged by the Pope deciding to hand in his resignation. You can follow all the unfolding news on that story with Barney Henderson and Jennifer O’Mahony.
But, as Louise Armitstead tweeted earlier, RBS might be rather glad of the distraction:
14.45 Stephen Hester, RBS’ chief executive, is likely to face questions this afternoon over his remuneration. Late last month, it emerged that he could still receive a pay package for his work last year worth more than £7m, even after RBS moved to cut his annual bonus to less than £1m.
Harry Wilson wrote at the time:
In a statement on Thursday night, the bank said Mr Hester would get a bonus of £963,000 as the taxpayer-backed lender bowed to political and public pressure to ensure its chief executive was not handed more than £1m.
However, the bank admitted Mr Hester was still potentially eligible for an award under a long-term incentive plan (LTIP) worth as much as £4.8m.
This means his total pay package for last year including his £1.2m salary and £420,000 pension could reach £7.38m.
If Mr Hester were to receive his maximum LTIP grant it would take the total value of the awards made to him since he took over as chief executive in October 2008 to about £27.5m.
The actual value of these awards is likely to be substantially lower than this due to the collapse in RBS’s share price over the last 12 months.
14.40 John Hourican’s appearance in front of the commission also comes just a week after it emerged that he is leaving the bank. Helia Ebrahimi and Harry Wilson, the Telegraph’s senior City correspondent and banking editor, wrote at the time:
The head of Royal Bank of Scotland’s investment banking arm is set to give up a bonus pot worth £4m as he resigns from the lender over its involvement in Libor-rigging.
John Hourican, chief executive of markets and international banking, will leave the bank with the minimum pay-off to which he is entitled – a year’s basic salary of £700,000 – as he becomes the most senior executive at the taxpayer-backed lender to leave his job in the wake of the rate-rigging scandal.
Mr Hourican’s departure is expected to be announced to RBS staff as the bank publishes details of a settlement of around £400m over accusations it manipulated key global borrowing rates between 2005 and 2010. It is not known whether the bank will admit any liability.
John Hourican is expected to leave RBS at the end of the month.
14.38 RBS’ appearance comes a week after the bank was hit with a £390m fine over Libor. It is the second-largest penalty so far in an international investigation involving the manipulation of the London interbank offered rate (Libor), a benchmark used for trillions of dollars of financial instruments ranging from home loans to complex derivatives.
14.35 First up at 15.00 is Johnny Cameron, former chairman of global banking and markets at RBS. He’ll be joined by John Hourican, chief executive of markets and international banking at RBS and Peter Nielsen, chief executive of markets at the bank.
Then at 16.30, we’ll have Sir Philip Hampton, chairman of RBS and Stephen Hester, the bank’s chief executive.
14.30 Hello, and welcome to The Telegraph’s live coverage of Royal Bank of Scotland executives appearing in front of the Parliamentary Commission on Banking Standards.