Royal Mail banks in spotlight over Libor-rigging

[TrueBlueTerrier]

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The government is facing questions over its decision to hand the potentially lucrative mandate to float the Royal Mail to banks involved in the manipulation of Libor.

UBS and Barclays have been appointed as senior advisers on the stock market listing of Royal Mail, which could earn the scandal-hit lenders millions of pounds in fees, less than a year after they were fined nearly £1.3bn for attempting to rig global borrowing rates.

Pat McFadden, a Labour member of the Commission on Banking Standards and the Treasury Select Committee, questioned the appointments so soon after the banks had been fined.

“These banks have got an awful lot of work to do to restore public trust and I think people will ask why they are being given a substantial government contract when that job is far from complete,” said Mr McFadden.

Barclays was fined £290m last June after its staff were found to have attempted to rig Libor, while UBS was hit with a $1.5bn (£994m) penalty in December over its involvement in the scandal.

Goldman Sachs and Bank of America Merrill Lynch are also working on the Royal Mail IPO.

Michael Fallon, Business Minister, said the decision to hire the banks, followed a selection process that had been “contested by a large number of leading banks”.

“Given the lead time and preparatory work involved in readying an IPO, the appointed banking syndicate will work to make sure we are ready to proceed when the time comes and will be able to deliver strong, high quality investor demand to ensure a successful IPO for the taxpayer and for Royal Mail,” said Mr Fallon.

The investment banks are reckoned to be in line to share a fee pool from the deal of about £30m, however this could rise if the profits from the post-market trading of any extra shares allotted by the government are taken into account.

There have been calls in the past for banks involved in financial scandals to be banned from competing for government work.

[hans solo]

the government should be banned for scandalous work