By Matt Scuffham, Sinead Cruise and Steve Slater
Jan 29 (Reuters) - Royal Bank of Scotland Group saw 1.3
billion pounds ($2.1 billion) wiped off its value on Tuesday
following a report that it could face criminal charges as part
of an impending settlement over its role in a global interest
rate rigging scandal.
The Wall Street Journal reported that U.S. authorities were
pushing RBS to accept criminal charges as part of a settlement
which will see it fined up to 500 million pounds for the
attempted manipulation of the London interbank lending rate
(Libor) and other benchmark interest rates.
"It's put the word 'Libor' back in front of the banks and
people are using it as an excuse to take profits," says Central
Markets chief strategist Richard Perry.
RBS shares closed the day down 6 percent, the leading faller
in a 0.28 percent-weaker European bank sector, with volume in
the bank's shares at 257 percent of the 90-day daily average.
The bank declined comment on the WSJ report.
One RBS shareholder told Reuters that criminal charges would
make the bank more vulnerable to future litigation and said
Chief Executive Stephen Hester would be reluctant for the bank
to accept criminal responsibility.
"Stephen Hester is not the kind of man to play a dangerous
game but the stakes here could be rather high," one of the
bank's biggest institutional shareholders said.
The bank is braced for fines of up to 500 million pounds
($785 million) for its role in the scandal and expects the
punishment to be meted out as early as next week, sources have
said.
RBS, which is 81 percent owned by the British taxpayer,
would be the third bank after Barclays and UBS to settle
allegations over the attempted manipulation of the London
interbank offered rate (Libor) and other benchmark interest
rates.
Barclays was fined $453 million in June while UBS paid about
$1.5 billion in December. However, some analysts believe those
fines could be dwarfed by the costs to banks from civil
litigation linked to attempted interest rate rigging.
BONUS BATTLES
British trade union Unite attacked RBS over a report in the
Financial Times saying it planned to pay its investment bankers
bonuses of as much as 250 million pounds at a time when branch
staff are being laid off. Unite called on Britain's finance
minister to intervene.
"Once again it looks like ordinary bank workers and
taxpayers will pay the price for the greed at the top of RBS. It
is time George Osborne put his foot down. This is no way to
repay the country's patience," the union said.
RBS paid out 390 million pounds in bonuses at its investment
bank a year ago. Sources have told Reuters it plans to reduce
payments by over 100 million pounds this year to help pay Libor
fines.
RBS is facing intense scrutiny on its pay and bonuses due to
the state's majority ownership, although Barclays has also come
under stiff pressure to cut pay for its executives and
investment bank staff for several years.
Barclays is under particular pressure to show restraint this
year following its Libor punishment and criticism that its
culture and standards were too lax.
New CEO Antony Jenkins, who took over in August after his
predecessor Bob Diamond was felled by the Libor scandal, has
pledged to improve standards and restrain pay for staff and the
bank has sounded out some leading investors for their views.
Barclays could award bonuses of 1.5 billion to 2 billion
pounds for last year, Sky News reported on Tuesday, citing
people close to the bank. That would be down from 2.2 billion a
year ago.
Jenkins, who gets a base salary of 1.1 million pounds and
could get 2.75 million in annual bonus, is being lined up to get
a bonus of more than 1 million pounds, payable in deferred
shares, Sky said.
Barclays declined to comment.
($1 = 0.6367 British pounds)
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