By Sarah N. Lynch WASHINGTON (Reuters) - The U.S. Labor Department is leaning toward denying requests for regulatory relief by three big foreign banks that pleaded guilty to manipulating Libor interest rates but want to keep managing retirement accounts for clients. In letters to units of Deutsche Bank , UBS and the Royal Bank of Scotland , the department said it has "tentatively decided not to propose" exemptions sought by the banks due to their "failure to demonstrate that the exemptions would be in the interest of plan clients." The July 16 letters give each bank the opportunity to submit additional materials to make their case and try to sway the department. "We continue to engage with the DOL through the full application process to provide the information that we believe supports the grant of an exemption," UBS spokesman Gregg Rosenberg said. A Deutsche Bank spokeswoman had a similar comment, noting the bank takes "the concerns in the tentative denial letter very seriously" and is working to address them. A spokesman for RBS had no immediate comment. Pressure has been mounting on U.S. policymakers to more closely scrutinize regulatory exemptions sought by big banks that break the law. Last year, Securities and Exchange Commission Democratic member Kara Stein issued a scathing dissent against RBS, which had applied to the SEC for regulatory waivers also in connection with the Libor guilty plea. Under federal laws governing securities and retirement accounts, banks that commit crimes or are found liable for civil fraud are banned from managing client plans or certain capital-raising activities. They must seek exemptions in order to continue business as usual. Stein lambasted the agency for granting the bank a waiver, saying too often such requests are rubber-stamped and perpetuate a problem of banks being "too big to bar." Since then, Democratic members of Congress have urged the SEC and the Labor Department to more closely scrutinize the activities of law-breaking banks before granting exemptions. At the Labor Department, banks with criminal convictions must apply for exemptions to permit them to continue managing retirement accounts. The Labor Department reviews the request and if ample evidence is provided, it will then propose an exemption and give the public a chance to weigh in before finalizing it. Already this year the Labor Department has held one public hearing over a request by Credit Suisse for an exemption, after it pleaded guilty to conspiring to help U.S. citizens dodge taxes. Deutsche Bank, meanwhile, actually has two requests pending before the department. In addition to the request related to the Libor matter, it is also requesting an exemption following a 2011 indictment for manipulating the Korean stock market. On Aug. 24, the department proposed granting the bank a temporary exemption in advance of a Sept. 3 verdict in the South Korea case. The Labor Department's tentative denial of the other three exemption requests connected to the Libor cases was reported earlier by Politico. (Reporting by Sarah N. Lynch; Editing by David Gregorio)
Requests by Deutsche Bank, the Royal Bank of Scotland (RBS), and UBS to allow them to continue managing retirement accounts for clients, despite pleading guilty in the Libor scandal, are expected to be denied by the US Labor Department due to the banks' failure to demonstrate that the exemptions would actually be in the interest of the the clients. The banks have been accused of manipulating benchmark rates used as a proxy for borrowing costs across global financial markets.