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RBS plans to shut down interest-rate trading operations

BBR Staff Writer Published 19 May 2014

The Royal Bank of Scotland (RBS) is planning to shut down its interest-rate trading operations in a bid to cope with the rising capital and operating expenses.

RBS branch

The bank has already informed the customers regarding its decision to close both its Rates Prime Broking and Rates OTC Clearing businesses last week.

In a statement, the bank attributed the move to "increasing level of capital, operating costs and investment that would be required for business to be globally competitive in a market with extremely thin margins."

The shut down represents a further withdrawal from investment banking services, as RBS, the 81% UK government lender, continues to embark on its cost cutting drive to enable it return on profitability track, The Financial Times reports.

RBS' prime broking business offers margin consolidation and credit efficiency services to customers, while the rates OTC clearing unit helps customers in clearing interest rates contracts that relate to over-the-counter transactions.

The move by the lender comes after Barclays announced to cut down its operations in investment banking amidst a sharp decline in fixed income trading worldwide.

In addition, RBS is also expected to postpone a four-year push to augment the competitive position of its interest rates business, which was aimed at exploiting new rules around OTC derivatives trading and take on competitors, such as Morgan Stanley and JPMorgan.

Image: A branch of the Royal Bank of Scotland at Angel, London, UK. Photo: David Edgar.