Taxpayers face £500m bill for RBS Libor fraud

MPs warn of public fury at size of fines for wrongdoing, most of which will go to US watchdogs

British taxpayers are set to pay $800m (£500m) in fines as a result of Royal Bank of Scotland traders’ involvement in the Libor interest rate fixing scandal - with nearly all of the money going to the United States.

American watchdogs are set to hit RBS with as much as four-fifths of the total penalty as it becomes the third bank to settle over its traders’ role in the scandal.

The remaining £100m will come from the Financial Services Authority (FSA), which will eventually be returned to UK Government coffers. But people close to the talks told The Independent the figure hadn’t been finalised on the American side and could still go higher.

MPs tonight warned that the extent of the payouts would infuriate the public after taxpayers stepped in to rescue the bank with a £45bn bailout four years ago. It will also be a fresh blow to attempts by Stephen Hester, the bank’s chief executive officer, to rebuild its reputation – and to restore its financial health to a point where the public stake can be sold.

RBS is 81 per cent-owned by the Government, which means the taxpayer will effectively foot the bill for its fine, although the bank is expected to attempt to head off protests by cutting its investment bankers’ bonus pool. Senior managers may also see some of their bonuses “clawed back”.

John Hourican, the head of the investment bank, is expected to pay with his job. He is highly unlikely to face any criticism from regulators over the affair, not least because he was not aware of the traders’ activities. But the bank is thought to feel that it must show it takes the misconduct of its traders seriously and as a result Mr Hourican, the overall head of the business, will carry the can.

It is understood that RBS bosses are keen to avoid any repeat of what happened at Barclays, where the Libor storm ultimately cost the jobs of chief executive Bob Diamond and chairman Marcus Agius.

RBS nearly collapsed during the financial crisis, after it spent billions on the ill-advised acquisition of Dutch Bank ABN Amro until the intervention by the last Government.

MPs expressed dismay over the looming payment and warned over the new damage it would inflict on the bank’s reputation, despite the Libor scandal dating back to Fred Goodwin’s stewardship.

Andrea Leadsom, a Conservative member of the Treasury select committee, said: “All MPs receive communications from constituents angry that not only has the bank been bailed out, but that the taxpayer is effectively covering the cost of fines for wrongdoing. It compounds the anger people have about the conduct of the bank.”

Teresa Pearce, a Labour member, said: “We hold an enormous number of shares in that bank which ultimately need to be sold. If its reputation is that there were things going on that shouldn’t have been - and other things may still be going on - then the value of those shares will plummet. We need to know the money used to prop it up was well spent.”

Stephen Williams, the chairman of the Liberal Democrat Treasury committee, said: “It’s the shareholders that are suffering – in this case RBS is 80 per cent owned by the people. It is a direct hit on the value of the bank which will eventually be returned to taxpayer.”

The fine will take the total paid by British banks to US regulators - and therefore US taxpayers in the last year - to more than $3bn. HSBC paid $1.5bn to settle charges that it was used as a conduit from drug money and sanctions busting.

Standard Chartered, which is headquartered in London but mainly operates in Asia, paid $667m to various regulators in the US to settle charges of dealings with Iran while Barclays paid $450m over its part in the Libor fixing affair.

The Labour MP John Mann, a vociferous critic of the major banks, said: “The key thing is that people are held to account – we need to stop this criminal fraudulent behaviour. If American regulators can take criminal action for fraud, why aren’t our regulators taking criminal action as well?”

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Polish Speaking Buying Assistant

£18000 - £20000 per annum: Recruitment Genius: Superb opportunity for a BUYING...

Recruitment Genius: Support Worker

£14560 - £15000 per annum: Recruitment Genius: This company offers personalise...

Recruitment Genius: Key Account Manager

Negotiable: Recruitment Genius: A really exciting opportunity has arisen for a...

Recruitment Genius: Multi Trade Operative

£22000 - £24000 per annum: Recruitment Genius: An established, family owned de...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project