Taxpayer-owned banks Lloyds and RBS could face Libor fines

Lloyds Banking Group and the Royal Bank of Scotland (RBS), both part-owned by the UK taxpayer, could be fined for manipulating the London Interbank Offered rate (Libor).

Both banks are under investigation, though any final decision by the regulators is thought to be several months away.

Reports suggest that Lloyds could have to pay more than £1 billion because the banks’ potential liability could extend beyond its own customers.

A note released by Liberum Capital said that despite having a derivatives book worth just £2.1 trillion, ten per cent of the value of Barclays’ book, it may have to pay out proportionately more because of the scope for litigation.

So far, Lloyds share price has been relatively stable since the Libor scandal broke, whilst shares in Barclays have fallen by 15 per cent and those in RBS by about ten per cent.

However, this may change if other analysts follow Liberum Capital’s Cormac Leech’s example.

Barclays accepted a fine totaling £290 million from both US and UK regulators after admitting it attempted to manipulate interbank lending rates.

RBS is likely to be fined about the half the amount Barclays paid, around £150 million for similar offences to Barclays but on a smaller scale.

Estimates of the total fines have varied enormously and include the cost of legal claims.

Lloyds Banking Group is 41 per cent owned by the UK taxpayer and RBS is 83 per cent owned by the UK taxpayer.