The Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) faces a fine of $615 million for rigging the London interbank offered rate, or Libor. The bank will also enter a guilty plea on charges of wire fraud. RBS is the latest bank to face fines in connection with Libor rigging. Traders from RBS, Barclays PLC (NYSE:BCS) (LON:BARC) and UBS AG (NYSE:UBS) were arrested in connection with the rate rigging in November. Barclays PLC (NYSE:BCS) (LON:BARC) was fined $462 million for manipulating rates.
Officials at The Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) have been expecting a fine for their role in the rate rigging since November. Today Reuters reports that the bank’s chairman acknowledged problems in the bank’s “systems and controls and also in the integrity of a small group” of its employees.
More than 12 traders with The Royal Bank of Scotland Group’s offices in Tokyo, Singapore and London rigged Libor between 2006 and 2010. They continued to do it even after investigations were being launched into rate rigging around the globe. The Wall Street Journal reports that the investigation into RBS’ practices focused on the bank’s setting of the U.S. dollar, Swiss franc and yen Libor submissions.
The Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) announced today that it will take some of the money from staff bonuses to cover the hefty fine, which is the second-biggest thus far in the Libor rigging investigation. Of the $615 million, $137.1 million will be paid to U.K.’s Financial Services Authority, $325 million will be paid to the U.S. Commodity and Futures Trading Commission and $150 million will be paid to the U.S. Department of Justice.
RBS’ Japanese subsidiary will plead guilty to felony wire fraud in a DOJ investigation. According to The Wall Street Journal, the bank also agreed to deferred prosecution with the DOJ, saying that it would keep cooperating with the investigation in exchange for the deferral of antitrust and criminal wire fraud charges. RBS will also be able to keep its U.S. banking license.
Analysts at Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) issued a report to investors this morning about shares of The Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) in light of today’s announcement about the Libor rigging fine. They said they were estimating that RBS would have to pay about $783 million, so the bank’s actual $615 million fine is “a minor positive.”
The analysts also previewed U.K. Business Secretary Vince Cable’s speech this morning. He spoke on the BBC’s Radio 4 Today program and on Bloomberg Television. They expected him to talk about distributing shares of RBS to the public, with the public only paying for the stock when shares are sold while the government would share in the upside “over the award price in some pre-determined ratio.”
Bloomberg reports that today in Cable’s speech, he said an RBS sell-off “now looks a distant dream.” He did continue calling for the company’s stock to be given away to the public however.
“Recapitalization may be the best solution, but it is currently impractical,” Cable said. “Full nationalization would cost the taxpayer billions.”
Cable also berated banks for not lending enough money to small or medium-sized businesses.
Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) analysts say at this point, they are maintaining their Hold rating on the stock.