Outlook If you were wondering why Royal Bank of Scotland's settlement with regulators over its role in the Libor fixing scandal was taking so long to finalise, a little light has been shed on the matter.
The US Department of Justice now apparently wants the company, or at least one of its subsidiaries out in Asia where misdeeds took place, to plead guilty to some sort of criminal charge.
The DoJ has been facing some rather sharp criticism for letting banks like UBS and HSBC get off too lightly when it comes to this sort of thing. If they were prosecuted properly they might be banned.
But just as these banks were too big to fail, they are too big to ban. Shutting megabanks that do bad things out of the US could prove catastrophic for the world's financial system. Again the folly of allowing these institutions to grow to their great size and power is demonstrated.
Hence the idea forcing Royal Bank of Scotland to assume the position with a guilty plea.
Spanking a relatively small Asian subsidiary of the bank (as happened with UBS) will provide the Department of Justice with a handy trophy and some ammo with which to fight its critics. Look, see, we are doing our jobs. When we answer the phone by barking out "justice" we really mean it. Honest.
You can understand why RBS might be very reluctant to play ball. While the figures keep changing (£500m is the current best guess) for its fine, the scale of wrongdoing will probably make RBS look more like Barclays than UBS, where attempts to fix Libor were taking place among a much larger group of traders.
But Barclays settled early, helped the DoJ, and thus managed to escape having to plead guilty to anything. So it actually got off relatively lightly – and now it seems that Barclays did get an advantage from going first – when compared to RBS.
The problem for RBS is this: If it does plead guilty – and the DoJ usually gets its way – it could leave the bank in deep water when it comes to an avalanche of civil litigation, the cost of which could be frighteningly large.
Large enough to threaten RBS's financial stability? Probably not. But here's the thing. No one knows for sure. The British Government, which oversees taxpayers' controlling stake in this bank, has good reason to be nervous.