Royal Bank of Scotland in Talks to Settle Libor Allegations

Royal Bank of Scotlandis braced for a settlement with regulators over Libor manipulation that could cost it £200-£300 million – on a par with the landmark £290 million fine imposed on Barclays in June– with the first payment likely within three months.


RBS, 82 percent owned by the British government, is in advanced negotiations over allegations that a number of its traders sought to manipulate the London Interbank Offered Rate, the borrowing benchmark, for up to 10 years, said three people familiar with the affair. The first payment of a settlement is likely within the next three months.

Regulators around the world have been probing as many as 20 financial institutions over the manipulation of Libor, its European equivalent Euribor and other benchmark rates that underpin $500 trillion of contracts worldwide, from mortgages to complex derivatives.

The effort has been led, in the UK, by the Financial Services Authority and, in the U.S., by the Department of Justice and the Commodity Futures Trading Commission. Other banks being investigated include Deutsche Bank, UBS and Société Générale. Lawyers and bankers believe the next settlement is likely to come in October. People close to RBS said its deal should come before year-end.

However, in an unwelcome development for RBS and other banks under investigation, signs are increasing that the co-operation between regulators on either side of the Atlantic, shown by Barclays’ global settlement in June, is fracturing. That would mean RBS settling for a portion of the overall cost – perhaps £50 million – with the FSA, and negotiating the remainder later with other regulators.

A more drawn-out process would prolong the reputational damage for banks desperate to draw a line under the scandals.

RBS, which has sacked four traders over the affair and scrutinized emails covering a decade, is believed to have found evidence similar to the damaging messages sent among Barclays staff and to friends at other banks. RBS is being sued for wrongful dismissal by one of the four traders, Singapore-based Tan Chi Min.

In the most infamous Barclays email exchange, one banker thanked another for manipulating Libor submissions: “Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.”

Co-operation between regulators is fracturing because of political concerns and differences in how criminal investigations are conducted, people familiar with the situation told the Financial Times.

This tension has heightened in recent weeks with the involvement of the Serious Fraud Office, which announced in July a criminal investigation into manipulation of Libor and other rates. Before then, only the US authorities had pursued a criminal inquiry.