John Hourican, who heads the banks investment banking arm, is to step down in wake of the scandal
Royal Bank of Scotland (RBS) has announced John Hourican, head of its investment banking division, is to step down in the wake of the LIBOR fixing scandal.
RBS is expected to face criminal charges and a fine of around £500 million for its role in rigging the The London InterBank Offered Rate (LIBOR), the benchmark rate banks borrow from one another which also sets the price for lending.
Banking trade body the British Bankers' Association calculates LIBOR by polling banks daily for their estimates on inter-bank borrowing costs over set periods and in different currencies.
The rate is then calculated from the average rate after excluding the top and bottom quotes and is published before noon each trading day in individual currencies.
The LIBOR rate governs the price of more than 500 trillion US dollars-worth of loans and transactions around the world, including household mortgages.
Hourican will leave the bank at the end of the month and receive a parting gift of a year's salary in lieu of notice, worth around £700,000, Sky News reported last night.
He was also asked by the bank's board to forfeit the £4 million he is owed in shares, the news channel said.
A settlement with UK and US regulators is expected to be announced later today and Hourican is widely expected to shoulder the blame for RBS's role in rigging LIBOR, though he is not believed to be directly implicated.
Hourican has headed up RBS's wholesale bank since the group's 2008 bail-out and has overseen a restructuring of the division which has led to 10,000 jobs being slashed so far.
Financial news publisher Bloomberg News previously reported it has seen transcripts of internal conversations which outline RBS traders and managers routinely seeking to influence RBS LIBOR submissions between 2007 and 2010.
American prosecutors have already charged two former employees of Swiss bank UBS over the scandal, and are said to be keen to press criminal charges at RBS.
UBS has already agreed a near £1 billion settlement with regulators.
Hourican will not be replaced when the investment banking arm - which employs around 16,000 people - is broken up.
The heads of the two new divisions will instead report directly to chief executive Stephen Hester.
RBS, which remains 81 per cent taxpayer-owned, is one of 16 banks being investigated for rigging inter-bank lending rates.
The bank announced in January it was accelerating plans to break up its investment banking division in light of the LIBOR rigging scandal which will see the the markets business split from its international banking division.
Chancellor George Osborne said this week RBS would have to cut bankers pay to ensure the public was not left to pay the US regulator portion of the fine levied at the bank.
He said: “When it comes to RBS, I am clear that the bill for any US fine related to this investigation should on this occasion be paid for by the bankers, and not the taxpayer.”
The fine expected to be levied by the UK regulator the Financial Services Authority is expected to be in the region of £90 million.
Barclays Bank was fined £290 million last year for its involvement in LIBOR fixing.
Barclays chief executive Bob Diamond, who had previously headed up Barclays' investment banking division, was forced to resign just days after the fines were announced.
The Serious Fraud Office (SFO) formally launched an investigation into rate rigging in July of last year.
The SFO had opted not to continue with a criminal investigation into manipulation of inter-bank rates in 2011 because of cuts to its budget.
In Scotland, the Crown Office confirmed in July last year it is leading an investigation into the Scottish banking sector, which it said had been “under way for some time” but the scope of its investigation would be “extended” to include LIBOR.
RBS announced in July 2012 it had sacked four traders and suspended a further three at the end of 2011 for their alleged involvement in LIBOR fixing.
The bank is expected to announce a bonus pool of around £250 million this year.
The FT reported in January government ministers are prepared to explain publicly the state-owned bank has to pay bonuses in order to retain and motivate staff if the taxpayer is to realise a return on its £45 billion investment in the bank.