A dark underbelly of trading culture fueled the global banking scandal over interest-rate rigging, Royal Bank of Scotland Group PLC's (RBS) former head of investment banking said Monday.
Johnny Cameron, who left the bank in early 2009, said traders at banks involved in the attempted rate manipulation had more in common with each other than other bank workers, and that their behavior seemingly had little to do with the firms they worked for.

It is "as much about the culture of traders and people who trade things than any bank," Mr. Cameron said in testimony to a U.K. parliamentary commission studying ways to improve banks' ethical standards.

He said RBS' risk managers failed to recognize the potential for traders to influence submissions used to help set interest-rate benchmarks, and that the failure highlighted why traders need "tight and close management."

"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 was that the risk managers didn't recognize this as a risk, and those controls were not there," Mr. Cameron said.

RBS last week agreed to a GBP390 million settlement with U.S. and U.K. authorities, becoming the third financial firm after Barclays PLC (BCS) and UBS AG (UBS) to acknowledge that its employees sought to manipulate benchmark rates. RBS said 21 employees were directly involved, and had all either left the bank or been disciplined.

RBS Chief Executive Stephen Hester last week said "matey" trading culture was partly to blame for the scandal.

Outgoing head of investment banking John Hourican told the commission Monday that he was leaving the bank as a sign that he ultimately is taking responsibility for the issue. RBS last week announced his planned departure along with the settlement, although it stressed that Mr. Hourican had no direct involvement in the matter.

Mr. Hourican said the bank was effectively undergoing a "cardiac arrest" in October 2008, when he took over as head of investment banking and Mr. Hester joined RBS to forge a recovery plan. The bank took a GBP45.5 billion bailout from the government in 2008 and 2009.

Mr. Hourican defended Mr. Hester's decision to stay on at the bank, saying that stakeholders would be better off if Hester remained.

Mr. Hester and RBS Chairman Philip Hampton will testify to the Parliamentary Commission on Banking Standards later Monday.

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