LONDON: Royal Bank of Scotland (RBS) will be punished for its role in the global interest-rate rigging scandal with fines of around 400 million pounds ($627 million), sources familiar with the situation said.
The lender said on Wednesday it expected to pay “significant penalties” to settle regulatory probes into rigging Libor and other benchmark interest rates, but did not specify what fines it expected.
RBS, 81 per cent state-owned after receiving a taxpayer-funded bailout in the 2008 credit crisis, said it was in “late stage settlement discussions” with regulators in Britain and the United States, but no fines had yet been agreed.
“RBS will update the market on all pertinent issues relating to this matter shortly,” it said, adding it also expected regulators to impose other sanctions beyond the fines.
The bank will be fined by authorities in Britain and the United States for the attempted manipulation of the London interbank offered rate or Libor and other rates.
Reports have said it could also face criminal charges. John Hourican, head of RBS's investment bank, will part company with the bank following the settlement, sources said. Chief Executive Stephen Hester has warned of a “miserable day” for the bank, during which embarrassing emails exposing the extent of collusion between traders are set to be revealed.
The settlement comes as Britain's banks remain under scrutiny following a raft of scandals, which also include the mis-selling of loan insurance and complex interest rate hedging products and breaches of anti-money laundering rules. Britain's finance minister George Osborne has already tapped into the political sensitivity around the issue, saying this week that RBS's fines must be paid out of bankers' bonuses rather than from the pockets of taxpayers.
The revelations could put the future of RBS's investment bank under renewed scrutiny and are likely to re-ignite calls from critics who want the bank to focus on basic lending activities in its domestic market.
Business Secretary Vince Cable said the bank was “in limbo” and should have been fully nationalised when it was rescued in the financial crisis.
Instead the present government was saddled with the “worst of all worlds - responsibility without control”, Cable said in advance extracts of a speech released by his office.
Former Finance Minister Nigel Lawson said this week that the bank should be nationalised. Taxpayers are sitting on a loss of about 15.7 billion pounds on the RBS stake, after Britain pumped in 45.5 billion to keep the bank afloat. Cable said early hopes for a re-privatisation of RBS now look a “distant dream”.
RBS will be the third bank to settle with regulators investigating the affair. Its punishment will be greater than the $450 million fines paid by British rival Barclays, but well short of the record $1.5 billion levies handed out to Switzerland's UBS.
More than a dozen banks around the world have been scrutinized by regulators as part of an investigation into the suspected rigging of interbank rates, which are used to price trillions of dollars of financial instruments.