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
Sport
tennisLive: Follow all the updates from Melbourne as Murray faces Czech Tomas Berdych in the semi-final
Arts and Entertainment
'The Archers' has an audience of about five million
radioA growing number of listeners are voicing their discontent; so loudly that even the BBC's director-general seems worried
Arts and Entertainment
Henry VIII played by Damien Lewis
tvReview: Scheming queens-in-waiting, tangled lines of succession and men of lowly birth rising to power – sound familiar?
News
Joel Grey, now 82, won several awards for his role in Cabaret
people
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
Sport
Harry Kane celebrates scoring the opening goal for Spurs
footballLive: All the latest transfer news as deadline day looms
Arts and Entertainment
Master of ceremony: Jeremy Paxman
tvReview: Victory for Jeremy Paxman in this absorbing, revealing tale
2015 General Election
May2015

Poll of Polls

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

Tradewind Recruitment: Maths Teacher

Negotiable: Tradewind Recruitment: Our exclusive client in St Albans Hertfords...

Tradewind Recruitment: KS2 Primary Teachers

Negotiable: Tradewind Recruitment: Key Stage 2 Teachers needed in Hertfordshir...

Ashdown Group: Finance Manager - ACCA/CIMA - St Albans, Hertfordshire

£55000 - £58000 per annum: Ashdown Group: A truly exciting opportunity has ari...

Ashdown Group: Credit Controller - London, Old Street

£25000 - £28000 per annum + benefits: Ashdown Group: Credit Controller - Londo...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness