Royal Bank of Scotland (NYSE:RBS) chief Stephen Hester has announced he'll step down from the primarily government-owned bank at the end of the year.
The move isn't a total surprise. In January, I wrote about shareholders' demands for Hester's resignation amid the bank's involvement in the LIBOR manipulation scandal, for which the bank was fined $612 million. A report issued by the CFTC in February found RBS to be at the heart of the LIBOR scandal.
Hester joined RBS in 2008 after the bank's near collapse and led the restructuring after the government invested tens of billions of pounds to prevent its collapse. The government still owns 81% of the bank, and is preparing to take the embattled bank private. Since being rescued by the government in 2008, RBS has reported consecutive annual losses.
Although he won't receive a bonus for 2013, Hester will exit RBS with one year's salary severance, benefits worth approximately $2.5 million, and the potential for another $6 million as a result of RBS's long-term incentive plan.
Revolving door keeps spinning
Hester isn't the first bank executive to resign in the fallout from LIBOR. Barclays CEO Bob Diamond and chairman Marcus Agius resigned last year, as did Chief Operating Officer Jerry Del Missier and Alison Carnwath, head of the British bank's remuneration committee, who approved a controversially generous severance package for Diamond.
Real change comes to London?
While I was first optimistic and then cynical of any real change coming to the financial industry as a result of LIBOR, the British Banking Association (BBA) today proved me wrong. BBA revealed new laws for LIBOR that include a three-month embargo on the publication of rates, in a move that will clamp down on manipulating the rate to profit from micro-trades. The new rules will be effective July 1, and come about as the European Union attempts to seize control of benchmarks rates from London. Under EU control, the rates would be managed through the European Securities and Markets Authority.