RBS to wind down interest-rate trading business

(Reuters) - Royal Bank of Scotland said on Sunday it is winding down its interest-rate trading business as capital and operating costs increase.

RBS cited "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," as the reason for winding down its Rates Prime Broking and Rates OTC Clearing businesses.

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

Investment banks across the world have been struggling with tougher regulations and low interest rates.

Barclays Plc was the first British bank to scale back investment banking operations as its business culture faced with criticism by British regulators and it was fined for manipulating Libor benchmark interest rates.

(Reporting by Aashika Jain in Bangalore; Editing by Steve Orlofsky)