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UPDATE 2-UK financial watchdog fines, bans ex-RBS Libor trader

(Adds comment from Danziger's lawyer)

LONDON, Jan 8 (Reuters) - Britain's financial watchdog said on Monday it had fined former Royal Bank of Scotland interest rate derivatives trader Neil Danziger 250,000 pounds ($338,000) and banned him from working in any regulated financial activity.

The Financial Conduct Authority (FCA) said in a statement it had found that between 2007 and 2010 Danziger, who traded products referenced to Japanese Yen Libor (London Interbank Offered Rate) for RBS, was knowingly involved in the bank's failure to observe proper standards of market conduct.

Danziger disputes the FCA's findings and feels he is being "scapegoated for the systemic problems related to Libor", his lawyer, Ben Rose, a partner at law firm Hickman and Rose, said.

However, the ex-trader is too emotionally and financially drained to fight further, Rose said in a statement, adding: "He leaves it to others, better resourced, to press the FCA for answers, hopeful that, one day, the real truth will come out."

Danziger was dismissed by RBS over Libor-rigging at the end of 2011. The bank was fined 390 million pounds by UK and U.S. authorities for its part in the global scandal that also engulfed a number of the world's other biggest banks.

"Proper standards of market conduct reflect the interests of the whole community in the well-being of our financial markets," Mark Steward, executive director of enforcement and market oversight at the FCA, said on Monday.

"Mr Danziger's reckless disregard of these standards has no place in the financial services industry."

Libor underpins hundreds of trillions of dollars of transactions and is used to set rates on credit cards, student loans and mortgages.

The FCA said Danziger had routinely made requests to RBS's primary submitters with the intention of benefitting the trading positions for which he and other derivatives traders were responsible, and took those positions into account when acting as a substitute submitter. It also said Danziger entered into 28 "wash trades" - risk-free trades, with the same party, in pairs that cancel each other and for which there was no legitimate commercial rationale - to facilitate payments to two broker firms for personal hospitality. (Reporting by Emma Rumney and Kirstin Ridley; Editing by Keith Weir and Alexander Smith)