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LONDON, Feb 6 AFP

February 06 2013, 9:30PM

Royal Bank of Scotland (RBS) expects to pay "significant penalties" and face other sanctions from British and US financial regulators over its role in the Libor rate-rigging scandal.

Reports said RBS would settle by paying US and British authorities up to STG500 million ($A757.46 million).

"RBS confirms that it is in late-stage settlement discussions with these authorities," the Edinburgh-based bank said in a statement on Wednesday.

"Although the settlements remain to be agreed, RBS expects they will include the payment of significant penalties as well as certain other sanctions."

That would be more than Libor-related fines handed out to British bank Barclays last year but less than the amount slapped on Swiss lender UBS.

Dow Jones Newswires quoted one source as saying that an RBS unit, possibly based in Asia, could also plead guilty to a crime in the United States.

Some attempts to rig the Libor rate-setting process allegedly took place in Asia.

Other reports said the head of the lender's investment banking arm will step down, adding that John Hourican is to give up 4.0 million in past share awards.

RBS shares rallied 1.76 per cent to stand at 343.4 pence in Wednesday morning trade on London's benchmark FTSE 100 index, which was up 0.52 per cent at 6,315.61 points.

Angus Campbell, head of market analysis at Capital Spreads trading group, said the predicted fines were "towards the low end of expectations, so initial response from the market is positive."

Libor, or London Interbank Offered Rate, is a flagship instrument used all over the world, affecting what banks, businesses and individuals pay to borrow money. Euribor is the eurozone equivalent.

Libor is calculated daily, using estimates from banks of their own interbank rates, and affects the pricing of more than $300-trillion of contracts across the world, according to British regulator, the Financial Services Authority.

But the system has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure -- seriously damaging the reputation of the 'City of London' financial centre.

By Ben Perry