RBS Libor Settlement Faces Delays

File photo dated 03/12/09 of a woman walking past the headquarters of the Royal Bank of Scotland in the City of London as Tax
File photo dated 03/12/09 of a woman walking past the headquarters of the Royal Bank of Scotland in the City of London as Taxpayer-backed Royal Bank of Scotland today said "oh yes" to plans to spin off its Churchill and Direct Line insurance arm in a highly-anticipated stock market flotation.

* Deal now unlikely until late 2012/early 2013 - sources

* Regulators at different stages of investigation - sources

* Bank had hoped for settlement in early Q4 - sources

By Matt Scuffham and Steve Slater

LONDON, Oct 5 (Reuters) - Royal Bank of Scotland faces a delay in reaching a settlement over its role in the Libor interest rate rigging scandal because of difficulties agreeing a deal wi t h all the regulators involved, finance industry sources said.

The British bank is eager to draw a line under the affair and refocus attention on its recovery. The bank was partly nationalised during the financial crisis in a 45 billion pound rescue by the UK government.

Barclays was fined $450 million by U.S. and UK regulators in June for manipulating Libor - the London Interbank Offered Rate - and is the only bank to have settled.

More than a dozen banks are now under investigation by regulators for suspected rigging of interbank rates used to price trillions of dollars worth of financial products, including home loans and credit cards.

RBS was initially expected to settle with regulators early in the fourth quarter, but this is more likely to be at the end of 2012 or early next year because authorities around the world are working to competing agendas and at different speeds.

Reuters reported in August that U.S. and British authorities were at odds over how and when to interview key witnesses. The Financial Services Authority wanted to speak to traders ahead of a timetable set by the U.S. Justice Department.

RBS might have to settle individually with regulators instead of doing a collective deal because they are working to different time frames, several finance industry sources said.

"RBS would love to get it all over and done with. They would much rather have one fine paid up front than fines paid over several quarters because the drip feed is what investors don't like," said one source close to the bank.

Britain is keen to protect the value of its 82 percent RBS stake, with taxpayers currently sitting on a paper loss of 22 billion pounds.

RBS declined to comment on the timing or structure of any resolution.

The Financial Services Authority (FSA) declined to comment. Its chairman, Adair Turner, said in July that he expected to fine another bank for Libor rigging this year.


RBS said in August it had dismissed staff in relation to the Libor scandal following an internal investigation. It said it was co-operating with governments and regulators in the United States, Britain and Japan and with competition authorities in Europe, the United States and Canada.

Court documents filed in Singapore showed a former RBS trader discussed Libor fixing with traders from other banks and described the process as a cartel.

A person familiar with the matter said on Friday RBS had suspended a trader earlier this year for attempting to manipulate a reference lending rate in Singapore.

RBS appeared to be preparing the ground for a settlement in August when Hester said the bank would "stand up and take any punishment" arising from the affair.

Some analysts believe the bank could face a tougher punishment than Barclays which received a 30 percent "discount" on the fines for co-operating with authorities.

Barclays' executives said in July that fines handed out to other banks would "put in perspective its own punishment."

Reuters reported in July that RBS and Switzerland's UBS were two of the banks that had played a central role in the manipulation of the rates.

The fallout from Barclays' fine led to the departure of Chief Executive Bob Diamond.

The regulatory mood has since become more aggressive.

U.S. authorities, for example, have attacked practices at UK banks Barclays, HSBC and Standard Chartered over the summer. A fine by New York's banking regulator on Standard Chartered for lax anti-money laundering controls on transactions with Iran hig h lighted competition between U.S. regulators.

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