RBS braces for Libor fine and mounting PPI costs

Royal Bank of Scotland is expecting to be hit by a financial penalty for the role in played in the manipulation of the Libor rate as it set aside another £450 million to cover insurance mis-selling and the summer technological glitch.

In a statement accompanying its third quarter results, the state-owned lender said it continues to cooperate fully with investigations by various governmental and regulatory authorities into its submissions, communications and procedures relating to the setting of Libor and other trading rates.

RBS is being probed by a number of authorities, including the US Commodity Futures Trading Commission, the US Department of Justice and the Financial Services Authority, along with various other authorities in Europe and Asia. It has dismissed a number of employees for misconduct as a result of its investigations into these matters.

The competition authorities are also investigating certain individuals at the bank in relation to the setting of Libor and other trading rates.

RBS expects to be hit with a fine in the near future as the investigations conclude. ‘The group expects to enter into negotiations to settle some of these investigations in the near term and believes the probable outcome is that it will incur financial penalties,’ RBS told the stockmarket.

‘It is not possible to estimate reliably what effect the outcome of these investigations, any regulatory findings and any related developments may have on the group, including the timing and amount of fines or settlements, which may be material.’

PPI and tech glitch costs mount

At the same time the bank said it was putting aside an additional £400 million to cover to cover the mis-selling of payment protection insurance, lifting its total provision to £1.7 billion.

On top of this the bank said it had also stored a further £50 million to cover compensation costs after a recent computer systems failure left thousands of its customers unable to access their money. This lifts the total cost of the meltdown to £175 million.

Third quarter numbers for the bank, which is 82%-owned by the taxpayer, also made for grim reading.  The group registered a loss of £1.2 billion over the period versus £2 billion for the corresponding period last year.

RBS chief Stephen Hester told the market the bank was working hard to restore its reputation.