RBS expects £400m Libor fine

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In a statement released on Wednesday, Royal Bank of Scotland (RBS) confirmed it was in "late-stage settlement discussions" with US and UK regulators over its involvement in the Libor scandal.

The bank is expected to be fined about £400 million after being accused of colluding with other financial institutions to rig Libor rates during the global financial crisis. Barclays (BARC) and UBS have already received fines of £290 million and £940 million respectively.

"Although the settlements remain to be agreed, RBS expects they will include the payment of significant penalties as well as certain other sanctions," RBS stated.

With the bank being 81%-owned by the tax-payer, the government has made it clear that the fines should be paid from staff bonuses, saying neither taxpayers nor bank customers should bear the cost.

Louise Cooper of CooperCity disagreed with this recommendation: "I don't think the fines should be paid out of the whole of the RBS bonus pool. Most of the investment bankers at RBS have not done wrong. To punish them for others' actions is like the using a whipping boy for a king.

"And I am afraid that is a good analogy because these big-hitter traders and brokers in the good times were making a fortune for their banks and were regarded as kings. It is only now that we know their profits were created thanks to their illegal activities. To punish those not responsible sends out a terrible signal and demotivates and demoralises those left."

Separately, the head of RBS's investment banking arm since 2008, John Hourican, is also expected to step down, despite there being no suggestion he was involved in the scandal, with many analysts believing he was a sacrificial offering.

"I disagree that Hourican is a scapegoat," argued Cooper. "Those at the top must be held accountable as they set the culture that allowed illegal behaviour to occur. But I also think that those who were directly involved in rigging Libor must be held to account - they should end up in court. And if found guilty, they should be banned by the Financial Services Authority [from] ever working in the finance industry and at the very minimum forced to repay their ill-gotten gains.

"If you manipulate the price of a product to make your trading profitable then it is obscene that you keep the profits from it. The bank has had to pay large fines, so should those responsible. And to be honest, just because it is white-collar crime does not mean that those involved should not end up in jail. They stole from British savers and borrowers as much as if they broke into their house and took cash."

Results preview

RBS will report its fourth-quarter results on 28 February.

The bank is set to report another big loss for the fourth quarter of 2012, with Investec's Ian Gordon predicting £1.7 billion of net negative exceptional items and a net asset value per share that should fall to around 460p. He warned that "normality may still not return before 2017". He had a 'sell' recommendation on the stock.

Chris Manners, analyst at Morgan Stanley, rated the stock a 'hold', explaining: "Although [we] see value at current levels, the prospect of dividends and exit of UK government appears somewhat far off."