Newspaper article International Herald Tribune

U.S. Seeks Guilty Plea from R.B.S. Unit in Asia ; Scottish Bank Expected to Agree to Settlement in Libor Rate-Rigging Case

Newspaper article International Herald Tribune

U.S. Seeks Guilty Plea from R.B.S. Unit in Asia ; Scottish Bank Expected to Agree to Settlement in Libor Rate-Rigging Case

Article excerpt

Shares of the Royal Bank of Scotland stumbled Tuesday after reports that the U.S. authorities were pursuing a guilty plea against an Asian subsidiary at the center of an interest rate manipulation scandal.

Using a template developed in the rate-rigging case against UBS last year, the U.S. Justice Department is pursuing a guilty plea, along with fines and penalties, against an Asian subsidiary of Royal Bank of Scotland that was at the center of an interest rate manipulation scandal, according to two people with knowledge of the matter.

The case could come as soon as next week. The R.B.S. settlement is likely to include more than $650 million in fines levied by the U.S. and British authorities, according to two other people with direct knowledge of the matter. At that level, the penalties would be the second-largest settlement in the rate manipulation case after a $1.5 billion agreement with UBS last month. Barclays paid $450 million in a settlement last summer.

The wave of action has centered on the London interbank offered rate, or Libor, and other critical international benchmark rates, which are central to determining the borrowing costs for trillions of dollars of financial products like corporate loans and credit cards. Banks are suspected of reporting false rates to squeeze out an extra profit and, in some cases, to deflect concerns about their financial health during the financial crisis.

The U.S. Justice Department's criminal division, which is pushing for a guilty plea with the Asian subsidiary of R.B.S., could also strike a nonprosecution agreement with the parent company.

The threat of charges against the subsidiary has weighed on the company's stock. After The Wall Street Journal first reported the potential guilty plea Tuesday, the bank's stock dropped 6 percent by the close of trading in London.

The settlement terms are not yet final. R.B.S., which is 82 percent owned by British taxpayers after it received a government bailout during the financial crisis, is resisting the guilty plea for the Asian subsidiary over fears of the potential fallout. The bank does not have much leverage with the U.S. Justice Department, however, which can indict the subsidiary if it resists the guilty plea. An indictment would deliver a harsher blow to the bank and potentially set up a protracted legal battle. …

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