Royal Bank of Scotland Group PLC (NYSE: RBS) may have to settle criminal charges with the United States based on allegations that it manipulated interest rates. This could, in turn, cause sharp cuts in employee compensation.

According to The Wall Street Journal:

U.S. authorities are pushing for a settlement of interest-rate-rigging allegations with Royal Bank of Scotland Group PLC that would result in a unit of the big British bank pleading guilty to criminal charges in addition to paying a penalty, according to people briefed on the negotiations.

Bloomberg reports:

Royal Bank of Scotland Group Plc, Britain’s biggest publicly owned lender, may reduce the bonus pool at its investment bank by more than a third as it prepares to pay fines to U.S. and U.K. regulators for Libor manipulation, a person with knowledge of the plan said.

RBS is poised to set aside about 250 million pounds ($393 million) for bonuses at the division, compared with 390 million pounds for 2011, said the person, who asked not to be identified because a final decision is yet to be taken. RBS plans to recoup between 100 million pounds and 150 million pounds from the bonus pool to offset the 500 million pounds it expects pay in fines to regulators to settle allegations of rate-rigging as soon as next week, two people with knowledge of the matter said earlier this month.

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