Royal Bank of Scotland is bracing itself for hefty fines for its role in the Libor fixing scandal.
Stephen Hester, chief executive of the taxpayer-controlled bank, said he expected it to face a significant hit over the scandal, but would not speculate how much.
He admitted the reputation of the banking sector had fallen to "new lows." He said: "This is dangerous because customer trust is a pre-requisite for a successful banking sector and an effective banking sector is so important to economic stability and growth."
RBS admitted that it had "dismissed a number of individuals" over the scandal. Barclays was fined £290m in June by regulators. Analysts at Morgan Stanley have suggested RBS and Lloyds could face combined fines of £840m.
RBS said it is being investigated by three regulators in the US, the Financial Services Authority in this country, the European Commission and regulators in Canada and Japan. It also faces "a number of class and individual claims" in the US, which it believes it can defend.
"The Libor situation is on our agenda and is a stark reminder of the damage that individual wrongdoing and inadequate systems and controls can have in terms of financial and reputational impact," said Hester. "We will stand up and take any punishment that comes our way."
Computer failures at the bank during June have cost it £125m so far, and could rise further, it admitted. The bank took a further £135m hit on mis-selling payment protection insurance, taking the total to £1.3bn, and a £50m charge to compensate businesses mis-sold interest rate swaps. Pre-tax losses at RBS almost doubled to £1.5bn but that includes a £3bn accounting charge that analysts ignore for the strengthening value of its debt. Underlying operating profits fell from £2bn to £1.8bn.
Hester said that, three years after he launched his restructuring plan, "there is plenty left to do". He added: "We now have a good level of profitability from the rebuilt and ongoing bank and a lot more safety.
"We are safer and sounder than three years ago while we have been using the profits of the ongoing bank on the cost of the clean-up of the past. Eventually those profits will be available to shareholders."
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