Royal Bank of Scotland Expects 'Significant' Libor Penalties

RBS Libor Still

Royal Bank of Scotland has warned the stock market it faces 'significant penalties' and other sanctions from regulators in the UK and the US for its role in rigging Libor.

The bailed-out bank is expected to announce on Wednesday it will pay fines of about £400m and admit to criminal charges in its Asian division as part of a long-awaited settlement over the manipulation of the key benchmark rate.

As the business secretary, Vince Cable, raised questions about the future ownership of the bank, RBS was forced to issue a stock market statement in which it promised 'all pertinent issues' related to Libor would be announced shortly.

"RBS confirms that it is in late-stage settlement discussions with these authorities. Although the settlements remain to be agreed, RBS expects they will include the payment of significant penalties as well as certain other sanctions," the bank, more than 80% owned by the taxpayer, said.

John Hourican, the head of the investment bank, is expected to depart with a payoff, although without being blamed for Libor rigging, which has forced the bank to fire four individuals and face legal action in Singapore from one of those dismissed.

Cable and George Osborne want certainty from RBS that the portion of the fine being paid to US regulators will come from the pay of RBS bankers. Some £300m is expected to be handed to the Commodity Futures Trading Commission and the department of justice in the US with about £88m being paid to the Financial Services Authority in the UK.

Cable, in a speech on Wednesday, will discuss the future of ownership of RBS, which he has called for debate about a range of options from full nationalisation to a share distribution to taxpayers as outlined by the Liberal Democrats in the past.

"For the existing semi-state-owned companies, there is a range of options, from reprivatisation at a later stage to continued public ownership or mutualisation through public share distribution, as advocated by the Liberal Democrats. We should keep all of these options in play," Cable will say.

In an interview with the Guardian before the speech, he said: "I was an advocate for nationalising the bank but we are where we are. We've inherited this unsatisfactory situation, which is worst of all worlds, where we're responsible but we don't have control where we can direct it. It is unsatisfactory," he said.

But he conceded that for now, the RBS problem "had to be parked".

Cable later told BBC Radio 4's Today programme there was "no immediate prospect" of handing RBS shares to 46 million voters in a scheme first raised in 2011 – but said the options should be kept "alive".

When the RBS settlements are announced on Wednesday, regulators are expected to publish electronic exchanges between traders attempting to manipulate Libor.

Documents filed in a Singapore court by a former RBS trader, Tan Chi Min, who is bringing a case of wrongful dismissal on the basis that the bank condoned the manipulation of Libor, illustrate the type of exchanges. First reported by Bloomberg in September, the 231 pages of filings show Tan sent an instant message in April 2008, saying: "Nice Libor … our six-month fixing moved the entire fixing hahaha."

In other messages he describes Libor as a "cartel" and discusses how a hedge fund will be "kissing" another trader if the rate can be brought down, evoking memories of the promises by Barclays's Libor traders to deliver bottles of Bollinger champagne for shifting the rate.

RBS will be the third bank to be fined for rigging Libor; Barclays was fined £290m and Swiss bank UBS £940m.

Powered by article was written by Jill Treanor, for on Wednesday 6th February 2013 08.37 Europe/London © Guardian News and Media Limited 2010


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