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BBC reported today that Royal Bank of Scotland plc (LSE:RBS) (NYSE:RBS) is now in the final stage of negotiations as to how much fine it will pay over its alleged participation in the London Inter-Bank Offer Rates or LIBOR, which may also claim one executive’s seat at the bank.
According to Robert Peston, BBC’s Business Editor, RBS is poised to savour “substantial humiliation” when the agreement is reached and announced, citing sources that said evidences on manipulating this global benchmark for trillion-dollar transactions around the world were “lurid”.
The fines, Peston said, will be higher than what Barclays (LSE:BARC) paid for, but will be much lower than the £940 million slap Swiss Bank UBS got from US and UK regulators for the same offence.
Barclays was the first bank to pay a fine of £290 million back in June 2012 for rigging the LIBOR followed by UBS in December of last year. An article in The Independent said RBS may have to pay about £350 million for the rate-fixing scandal that added to the already tattered reputation of the UK’s banking sector.
UK’s major banks have been wrought with too many scandals last year, one can almost lost count and hardly keep track. Today’s revelation by Mr. Peston, however, will be a unique case, as RBS is now a partly-nationalised bank, 83% owned by the British public.
That means whatever amount the bank will have to cash out to pay for the fines will have to be taken out of the profit it has made, further delaying the chances of the UK public to get their money back and structure the bank as a private enterprise again.
What is startling about Mr. Peston’s statement today, in fact, was the revelation that said manipulation has continued to exist even after the bank was rescued by the UK Government following its collapse in the 2008 financial crisis.
He added, “RBS’s board did not become aware of the wrongdoing until notified about it by regulators in 2011”. That drove comments from readers attacking both the RBS management and the authorities that placed them there following the rescue.
Calls for Chief Executive, Stephen Hester, to resign were expressed, as a symbol of accepting responsibility for the scandal that happened under his nose, though that may be unlikely, according to Peston, though he hinted that the banks’ heads of investment banking and markets may have to bid their roles goodbye.
No statement was issued by RBS in response to the report.
Meanwhile, back at the City, RBS shares enjoyed 2.2% gain minutes before the market closed for today’s trading session, at 358.10 pence.
