Jan 29 (Reuters) - Royal Bank of Scotland Group saw1.3 billion pounds ($2.1 billion) wiped off its value on Tuesdayfollowing a report that it could face criminal charges as partof an impending settlement over its role in a global interestrate rigging scandal.
The Wall Street Journal reported that U.S. authorities werepushing RBS to accept criminal charges as part of a settlementwhich will see it fined up to 500 million pounds for theattempted manipulation of the London interbank lending rate(Libor) and other benchmark interest rates.
"It's put the word 'Libor' back in front of the banks andpeople are using it as an excuse to take profits," says CentralMarkets chief strategist Richard Perry.
RBS shares closed the day down 6 percent, the leading fallerin a 0.28 percent-weaker European bank sector, withvolume in the bank's shares at 257 percent of the 90-day dailyaverage.
The bank declined comment on the WSJ report.
One RBS shareholder told Reuters that criminal charges wouldmake the bank more vulnerable to future litigation and saidChief Executive Stephen Hester would be reluctant for the bankto accept criminal responsibility.
"Stephen Hester is not the kind of man to play a dangerousgame but the stakes here could be rather high," one of thebank's biggest institutional shareholders said.
The bank is braced for fines of up to 500 million pounds($785 million) for its role in the scandal and expects thepunishment to be meted out as early as next week, sources havesaid.
RBS, which is 81 percent owned by the British taxpayer,would be the third bank after Barclays and UBS to settle allegations over the attempted manipulationof the London interbank offered rate (Libor) and other benchmarkinterest rates.
Barclays was fined $453 million in June while UBS paid about$1.5 billion in December. However, some analysts believe thosefines could be dwarfed by the costs to banks from civillitigation linked to attempted interest rate rigging.
BONUS BATTLES
British trade union Unite attacked RBS over a report in theFinancial Times saying it planned to pay its investment bankersbonuses of as much as 250 million pounds at a time when branchstaff are being laid off. Unite called on Britain's financeminister to intervene.
"Once again it looks like ordinary bank workers andtaxpayers will pay the price for the greed at the top of RBS. Itis time George Osborne put his foot down. This is no way torepay the country's patience," the union said.
RBS paid out 390 million pounds in bonuses at its investmentbank a year ago. Sources have told Reuters it plans to reducepayments by over 100 million pounds this year to help pay Liborfines.
RBS is facing intense scrutiny on its pay and bonuses due tothe state's majority ownership, although Barclays has also comeunder stiff pressure to cut pay for its executives andinvestment bank staff for several years.
Barclays is under particular pressure to show restraint thisyear following its Libor punishment and criticism that itsculture and standards were too lax.
New CEO Antony Jenkins, who took over in August after hispredecessor Bob Diamond was felled by the Libor scandal, haspledged to improve standards and restrain pay for staff and thebank has sounded out some leading investors for their views.
Barclays could award bonuses of 1.5 billion to 2 billionpounds for last year, Sky News reported on Tuesday, citingpeople close to the bank. That would be down from 2.2 billion ayear ago.
Jenkins, who gets a base salary of 1.1 million pounds andcould get 2.75 million in annual bonus, is being lined up to geta bonus of more than 1 million pounds, payable in deferredshares, Sky said.
Barclays declined to comment.
Barclays (BARC)