In its final notice to RBS, the FSA stated that RBS's misconduct in its role as a LIBOR submitter for Japanese Yen (JPY) and Swiss franc (CHF), included:

This course of misconduct amounted to both a breach of RBS's obligation to observe proper standards of market conduct (Principle 5, FSA's Principles for Businesses), and to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems (Principle 3).

The FSA found that, between October 2006 and November 2010, RBS often made JPY and CHF LIBOR submissions that took into account requests made by its derivatives traders. Those traders were RBS employees charged with trading interest rate derivatives (for example, interest rate swaps, forwards and futures) to make a profit for the bank.

Requests were made by derivatives traders to "bump up" "drop" or submit rates that were "thru the roof!!!!". The need for a high or low LIBOR rate varied depending on the positions taken by the traders making the requests; as one trader crudely put it: "I'm like a whores drawers".

The derivatives traders therefore stood to profit or avoid losses as a consequence of movements in the final benchmark rates resulting from RBS's submissions.

The FSA found that individuals at RBS colluded with other banks (either directly or through middlemen at brokerage firms) to influence their submissions in a way that would increase the chances of the final LIBOR rate being in RBS's favour.

The requests made were unequivocal and were apparently designed to coincide with the dates on which counterparties were required to pay or receive monies linked to LIBOR (so-called "fixing dates"). The following demonstrates the nature of the requests:

Derivatives trader at RBS: "please please low 6m [LIBOR submission] on Monday…I have got a big fix".

Trader at Panel Bank 1: "no worries".

The collusive behaviour, it was said, included corrupt brokerage payments made to interdealer brokers who facilitated the dissemination of requests between panel banks. These corrupt payments were disguised as commissions attached to trades channelled through the brokerage firms. The FSA found that those trades (so-called "wash-trades") had no risk, no legitimate commercial rationale, and were made solely to benefit the brokers who received the payments disguised as commission.

The benefit to be gained from employing the brokers is clear to see from an excerpt taken from a conversation between a derivatives trader at RBS and an interdealer broker. In response to a request for a low LIBOR rate, the interdealer broker stated: "We've, so far we've spoke to [Panel Bank 3]. We've spoke to a couple of people so we'll see where they come in alright. We've spoke, basically…basically we spoke to [Panel Bank 3], [Panel Bank 4], [Panel Bank 5], who else did I speak to? [Panel Bank 6]….".

Money market traders were employees primarily charged with managing RBS's funding needs by ensuring that RBS kept its currency holdings at desirable levels. This was done by lending money when RBS had a surplus, or borrowing money when it had a shortage. Money market traders also generated profit for the bank; for example, by lending money out at a high six-month LIBOR rate and then borrowing it back at a low one-month LIBOR rate. In this respect, and others, the final BBA LIBOR rates directly affected the profitability of transactions entered into by money market traders.

The FSA found that money market traders who submitted rates on behalf of RBS on occasion considered the profitability of transactions in their money market books as a factor when making JPY, CHF and USD LIBOR submissions. It also found that the submitters were motivated by profit, as the performance of the money market books was a factor in determining the size of their bonuses.

That RBS has been punished for collusion and submitting rates that benefitted the profit position of its traders is uncontroversial. What is more deserving of analysis is how far the scrutiny of money market traders ought to go. The BBA, the organisation charged with administering and regulating LIBOR, issued guidance during the relevant period stating that LIBOR rates: "must be submitted by members of staff at a bank with primary responsibility for management of a bank's cash, rather than a bank's derivative book" (BBA "Terms of Reference for LIBOR Contributor Banks", 15 July 2009).

The BBA must have known that cash managers used derivatives for liquidity management purposes. It must have accepted that those submitters were not behind an ethical barrier that separated them from those who might benefit from particular LIBOR postings. It does not appear that the BBA gave any guidance to submitting banks on how to manage this inherent structural conflict. It is odd now that banks (and presumably, in due course, their staff) are being and will be disciplined for failures the existence of which were obvious to, if not in fact known and yet not addressed by, either the BBA or, indeed, the FSA.

It is noteworthy that the FSA did not prescribe, at any material time, that the submitting of LIBOR rates was an activity that could only be undertaken by an FSA-approved person. Nor did the FSA explicitly require firms to have in place systems and controls to ensure the effective and safe operation of their LIBOR rate submitting process.

The FSA's Director of Enforcement and Financial Crime has stated that "the size and scale of our continuing investigations remains significant". This is to be welcomed, but with the proviso that it is only proper that persons are judged by the standards within which they operated at the time, and not with the benefit of hindsight. This applies to entities such as banks, but is of greatest relevance to the individuals that are under investigation.

It is not a defence to a disciplinary allegation to argue that the FSA failed to warn that certain behaviour was unacceptable. However, when judging an individual's past conduct, it is obviously relevant that all concerned (firms, trade bodies and regulatory agencies alike) failed to identify that the prescribed ways of behaving involved inevitable tensions and conflict risks.