The Canadian affiliate of the Royal Bank of Scotland Group has dropped its challenge against a court order compelling it to release documentation to the Competition Bureau as part of the agency's investigation into the manipulation of the interbank interest rate known as the LIBOR.

The scandal concerns the manipulation of a key interbank interest rate known as the LIBOR by several multinational banks and financial services firms, including the Royal Bank of Scotland (RBS), Barclays and UBS, between 2006 and 2010.

The Competition Bureau investigation focuses on the manipulation of the LIBOR for the Japanese yen, but the wider scandal allegedly involved several different currencies, including the U.S. dollar and the Swiss franc.

"The abandonment [of the challenge] … will allow the bureau to move forward with its investigation of alleged collusive conduct into the setting of yen LIBOR rates," the bureau said in a press release Friday.

LIBOR stands for the London inter-bank offered rate, a benchmark setting that influences borrowing costs for businesses, financial institutions, governments and consumers. The scandal cost British bank Barclays alone about $472 million in fines and forced the resignation of its chief executive, Bob Diamond.

The LIBOR affair came to light in June 2012 when the Barclays settlement with U.K. and U.S. regulators became public, but court documents show that the Competition Bureau, and other regulatory authorities around the world, had been looking into the matter since at least January 2011.

Since the Barclays settlement, several more financial institutions have been fined for their role in the scandal, including RBS, which agreed to pay roughly $614 million to U.S. and U.K. authorities earlier this year.

Must turn over records by end of June

RBS Canada must produce the records in question — internal documents held in the U.K. — by June 28, the release said.

The order demanding that the bank turn over the records was issued in May 2011 by the Ontario Superior Court under a provision of the Competition Act that allows the bureau to obtain records for the purpose of an investigation .

The bank challenged the order on the grounds that the bureau's actions were unconstitutional and beyond the scope of its mandate and that it did not have jurisdiction to obtain records housed outside Canada.

The bureau had obtained similar court orders for the Canadian affiliates of HSBC, Deutsche Bank, JP Morgan Bank, and Citibank, as well as ICAP (Intercapital), an interdealer broker active in the wholesale markets in interest rates, credit, commodities, foreign exchange and equity derivatives.

It identified eight traders, all based in London, whom it alleges were involved in fixing the yen LIBOR.

"The IRD [interest-rate derivatives] traders at the participant banks communicated with each other their desire to see a higher or lower yen LIBOR to aid their trading positions," federal prosecutor Robert Morin, acting on behalf of the Competition Bureau, said in documents filed in Ontario Superior Court.

"The alleged offences were carried out through emails and Bloomberg instant messages between IRD traders at the participant banks and employees of cash brokers, who had influence in setting the yen LIBOR rates. These requests for changes in the yen LIBOR were often initiated by one trader and subsequently acknowledged by the trader to whom the communication was sent."

The bureau said Friday that it is exploring options for how it could recuperate the money it spent fighting RBS Canada's now abandoned challenge.