RBS: To pay significant Libor fine

REUTERS

Pedestrians are reflected in the window of a branch of the Royal Bank of Scotland in London.

London - Royal Bank of Scotland on Wednesday said it expected to pay “significant penalties” and face other sanctions from British and US financial regulators over its role in the Libor rate-rigging scandal.

Reports said RBS would settle by paying US and British authorities up to £500 million ($783 million, 577 million euros), in an announcement expected on Wednesday.

“RBS confirms that it is in late-stage settlement discussions with these authorities,” the Edinburgh-based bank said in a statement.

“Although the settlements remain to be agreed, RBS expects they will include the payment of significant penalties as well as certain other sanctions.”

That would be more than Libor-related fines handed out to British bank Barclays last year but less than the amount slapped on Swiss lender UBS.

Dow Jones Newswires quoted one source as saying that an RBS unit, possibly based in Asia, could also plead guilty to a crime in the United States.

Some attempts to rig the Libor rate-setting process allegedly took place in Asia.

Other reports said the head of the lender's investment banking arm will step down, adding that John Hourican is to give up £4.0

million in past share awards.

RBS shares rallied 1.76 percent to stand at 343.4 pence in morning trade on London's benchmark FTSE 100 index, which was up 0.52 percent at 6,315.61 points.

Angus Campbell, head of market analysis at Capital Spreads trading group, said the predicted fines were “towards the low end of expectations, so initial response from the market is positive.”

Libor, or London Interbank Offered Rate, is a flagship instrument used all over the world, affecting what banks, businesses and individuals pay to borrow money. Euribor is the eurozone equivalent.

Libor is calculated daily, using estimates from banks of their own interbank rates, and affects the pricing of more than $300-trillion of contracts across the world, according to British regulator, the Financial Services Authority.

But the system has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure Ä seriously damaging the reputation of the 'City of London' financial centre.

At Swiss bank UBS, two former employees were charged in December when the group's Securities Japan unit settled similar allegations with US and British authorities for $1.5 billion, the biggest amount to date.

US Justice officials do not plan to charge individuals at RBS with crimes, Dow Jones said.

The British government owns more than 80 percent of the shares in RBS, owing to a massive £45.5 billion bailout of the bank during the global financial crisis, while there is considerable pressure in Britain for senior bank executives to take responsibility for the Libor crisis.

“Of course the taxpayer shouldn't pay, and nor should the consumers of banks,” Britain's Business Secretary Vince Cable told BBC radio on Wednesday.

“If there is a substantial fine it's got to be absorbed by staff in the banks in those bits of the banks that took the excessive risks and created the problem,” he added amid calls that lenders should slash upcoming bonus payouts to fund any penalties.

Barclays bank in June agreed to pay about $450 million in connection with the affair, which led to the resignations of three Barclays senior board members, including chief executive Bob Diamond.

More than a dozen other institutions remain under investigation, while last October the British government announced plans to make it a criminal offence to manipulate Libor. - Sapa-AFP