RBS faces £500m fine over Libor rate rigging

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A FINE of up to £500 million could be slapped on Royal Bank of Scotland by trans­atlantic regulators as early as this week for its part in rigging the key Libor rate.

Sources say Britain’s Financial Services Authority, the US Department of Justice and American commodities regulators are close to signing off on the punishment.

Such a fine on 82 per cent taxpayer-owned RBS would be much greater than the £290m levied on British rival Barclays last summer that sparked the resignation of chief executive Bob Diamond, chairman Marcus Agius and chief operating officer Jerry del Missier.

However, it is thought that RBS will get off much more lightly than the £940m that Swiss giant UBS was fined ­recently for the scandal.

One source familiar with the matter said: “The regulatory outcome could be as early as this week, but it is equally possible it could be delayed beyond that.”

Another source said: “The market is talking about this fine being about £500m, but I think it could be nearer to £400m, with £500m at the ­upper end.”

RBS chief executive Stephen Hester said last autumn that he hoped issues would be resolved with regulators before the bank’s 2012 trading results are released in late February. RBS and the FSA declined to comment.

The City is believed to be ­relaxed about the looming punishment despite the extra reputational damage to the bank.

One analyst said: “I don’t think RBS’s punishment will be as severe as UBS because by all accounts the wrongdoings on Libor at UBS looked more severe.

“UBS’s fine is now looked on by the industry as more of an outlier. At the same time, RBS is unlikely to be treated as leniently as Barclays because the latter was the first to blow the whistle on the scandal and was treated accordingly.

“Anyway, the City is likely to take the matter in its stride, as it did the £1bn RBS set aside for the earlier payment protection insurance scandal. Analysts look through fines because they are more concerned with the performance of the underlying business.”

It is expected that John Hourican, chief executive of RBS’s rationalised investment banking business, will pay with his job for the Libor manipulation as he was chief operating officer at the time of the events.

But Hester’s job is understood to be safe given that he only came on board as chief executive in 2008, following the financial crash and Fred Goodwin’s ousting.

RBS, a sharply scaled back business since Hester’s arrival, is expected to come under political pressure to further shrink its investment bank in the wake of any Libor fines.