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UPDATE 2-Rabobank faces second-biggest fine in Libor scandal

Wednesday, 23 Oct 2013 | 11:45 AM ET

AMSTERDAM, Oct 23 (Reuters) - Dutch lender Rabobank expects a fine from regulators over its alleged role in the manipulation of benchmark interest rates, which one source put at around $1 billion, in the next two weeks.

That would make Rabobank's penalty the fifth Libor-related settlement and the second-biggest in a global investigation into the rate-rigging scandal. Swiss bank UBS paid a record fine of $1.5 billion late last year.

More than a dozen banks and brokerages are being investigated by regulators and anti-trust watchdogs worldwide for manipulating benchmark rates such as Libor and Euribor, which are used to price trillions of dollars of products from derivatives to credit cards.

Rabobank, a cooperative bank with a history of financing agriculture and commodities, on Wednesday said authorities had almost completed investigations into its role in the Libor and Euribor setting process.

"Rabobank expects to be able to enter into settlements with these authorities within the next two weeks. Rabobank is not yet in a position to comment on possible settlement amounts," it said.

A source familiar with negotiations between the bank and U.S., UK and Dutch authorities said the fine being discussed was around $1 billion.

"That's clearly a large sum, but for a group like Rabobank, that's not going to derail things massively," said one bank analyst who asked not to be identified.

Rabobank made a net profit of 2.1 billion euros ($2.9 billion) in 2012. It has announced sweeping cost cuts and sold non-core assets such as its fund manager Robeco and private Swiss bank Sarasin to money and shore up its capital buffers.

Rabobank plans to cut about 8,000 domestic retail banking jobs by 2016 - reducing the headcount in those operations by nearly a third to 20,000 and will close about 300 out of the 800 or so existing branches of its member banks.

Together with reductions in remuneration packages and a decision to scrap bonuses for board executives, it hopes to save about 1 billion euros in costs.

Rabobank said in August that the estimated Libor settlement was recognised in its financial statement under "other liabilities", but gave no details.

These "other liabilities" amounted to 11.88 billion euros at the end of June, up from 11.07 billion euros at the end of December.

CHEESES AND TULIPS

Britain's Financial Conduct Authority, the Dutch central bank and the U.S. Commodity Futures Trading Commission declined to comment on details of the settlement. The U.S. Department of Justice did not immediately respond to a request for comment.

U.S. and British authorities have already fined Barclays , UBS, RBS and broker ICAP around $2.7 billion over the manipulation of benchmark interest rates such as Libor.

Professor of Organisational Behaviour at Cass Business School, Andre Spicer, said Rabobank's traders displayed the same "winner takes all" ethos as competitors, even though the bank is a co-operative owned by a group of regional banks rather than shareholders.

"Unlike the other big banks fined for Libor, Rabobank is a co-op. This means its traders were not being pushed by the same kind of capitalist discipline to show huge returns. Rather they were being fuelled by a culture shared by traders across the industry which encouraged them to win at any cost."

Rabobank, which finances producers of Dutch cheese and tulips exported around the world, was the only major Dutch bank that did not need a rescue during the 2008-2009 global credit crisis, unlike its once powerful rivals, ABN Amro, which had to be nationalized, and ING Groep, which is paying back state aid.