(In first sentence, corrects figure to $612 million, not $615
* RBS to pay fines to British and U.S. regulators
* RBS's Japanese unit pleads guilty to wire fraud
* Bank to cut bonuses to help pay U.S. fine
By Matt Scuffham and Kirstin Ridley
LONDON, Feb 6 Royal Bank of Scotland
will pay $612 million to U.S. and British authorities to settle
allegations it manipulated benchmark interest rates, and British
regulators warned there is more to come in the global
RBS became the third bank to pay fines in the Libor scandal.
The British bank, which is 82-percent-owned by the state
after the world's costliest bank bailout in 2008, said on
Wednesday it was cutting bonuses to help pay for the fine, in a
bid to avoid a public backlash.
The bank fears the scandal will embolden critics who want it
to further shrink its profitable investment bank and focus on
basic lending at home.
"What happened at RBS and other banks is totally
unacceptable," Britain's finance minister, George Osborne, told
Britain's Financial Services Authority (FSA) signalled more
large fines were in the offing.
"The size and scale of our continuing investigations remains
significant," said Tracey McDermott, director of enforcement and
financial crime at the FSA.
More than a dozen banks and brokerage firms, including JP
Morgan, Deutsche Bank and Citigroup,
are being investigated by regulators over the manipulation of
benchmark interest rates such as the London interbank offered
rate, known as Libor, and Euribor, which are used to price
trillions of dollars worth of loans.
For their roles in the Libor scandal, Switzerland's UBS
agreed in December to pay penalties of $1.5 billion,
and Britain's Barclays has paid $453 million.
Deutsche Bank has suspended five traders in connection with
alleged manipulation of Euribor, a source familiar with the
matter said on Wednesday.
Recent reports have raised the possibility of other banks
resolving liability through a group settlement, but in an
interview on Wednesday a top U.S. Justice Department official
shot down that idea.
"Criminal cases are not resolved in a group setting," said
Lanny Breuer, the head of the department's criminal division.
"We are going to go after each individual financial
Investigators said they discovered hundreds of attempts by
at least 21 RBS employees in London, Singapore and Tokyo to
manipulate Libor. RBS traders aided dealers at other banks,
including UBS, to rig the rates.
The abuse at RBS occurred from at least 2006 until late 2010
- after some of the traders learned of the probe into Libor.
The FSA criticised RBS for seating derivatives traders next
to people who submitted Libor rates and said the bank's systems
and controls were flawed as recently as March 2012.
Like their peers at Barclays and UBS, RBS staff were blatant
about what they were doing in internal chatrooms, according to
extracts of exchanges released by investigators.
A Swiss-franc trader at RBS told someone submitting rates to
Libor that if he submitted them in the way he wanted, he would
"come over there and make love to you."
A manager said "pure manipulation" was at work.
The U.S. Department of Justice said the near 300-year old
bank was guilty of a "stunning abuse of trust".
RBS is paying 87.5 million pounds ($137 million) to the FSA,
$150 million to the U.S. Department of Justice and $325 million
to the U.S. Commodity Futures Trading Commission, which
regulates trade in derivatives.
A unit of the bank in Japan also pleaded guilty in the
United States to one count of criminal wire fraud.
The parent company avoided criminal liability in the United
States, meaning it can retain its banking licence there and
avoid a fire sale of its U.S. business Citizens.
As part of its deferred prosecution agreement, the bank was
forced to admit and accept responsibility for its misconduct.
Lawyers expect a wave of civil lawsuits, potentially costing
banks tens of billions of dollars. It is unclear how many
individuals will be prosecuted.
U.S. prosecutors have filed criminal charges against two
former employees of UBS. Days before the Swiss bank was fined,
British police and anti-fraud officers arrested one of the
traders later charged in the United States along with two
employees of British brokerage firm RP Martin.
The U.S. Justice Department's Breuer said such inquiries
continued. "As of today there are no individuals, but as you can
tell, and we've demonstrated time again, this is an ongoing
investigation," he said.
A SOAP OPERA
RBS Chief Executive Stephen Hester wants to re-establish the
bank as a "normal" lender, shrinking the balance sheet by 700
billion pounds and cutting thousands of jobs as he jettisons the
previous management's ambition for global domination.
Speaking to reporters in London, an emotional-looking Hester
failed on three occasions to give a direct answer to questions
on whether he had considered resigning over the Libor scandal.
"This has been a soap opera for four years," he said. "The
people who sit in judgment of us can dismiss us at any time if
they feel that the bad bits get to be bigger than the good
Taxpayers are sitting on a loss of close to 16 billion
pounds on their RBS stake, frustrating politicians.
Britain's influential parliamentary commission on banking
standards has summoned Hester and RBS's chairman Philip Hampton
to discuss the Libor scandal and the future of the bank on
RBS said all but six of the 21 staff implicated had either
been fired or had already left the bank. The remainder were
RBS will cut 300 million pounds from its bonus pool,
including clawing back awards from previous years, to pay the
U.S. fines. The UK penalty will be donated to charitable causes,
including supporting soldiers and their families, the government
John Hourican, head of RBS's investment bank, is leaving at
the end of April after it was discovered the manipulation went
on after he took charge. He had no involvement in, or knowledge
of, the misconduct, RBS said. Hourican will receive a year's
salary but forgo share awards.
"Libor is the railroad tracks on which our banking system
runs," Laura Willoughby, chief executive of consumer group Move
Your Money, said of the rate rigging. "RBS and other banks have
shattered trust in the very foundations of our financial
RBS shares finished up 1.36 percent at 342.1 pence.
($1 = 0.6382 British pounds)
(Additional reporting by Laura Noonan, Andrew Osborn Tim Castle
and Myles Neligan in London, and Douwe Miedema and Aruna
Viswanatha in Washington; Editing by Mark Potter, Elaine
Hardcastle and Leslie Adler)