Last checked at 
(In first sentence, corrects figure to $612 million, not $615million)
* RBS to pay fines to British and U.S. regulators
* RBS's Japanese unit pleads guilty to wire fraud
* Bank to cut bonuses to help pay U.S. fine
By Matt Scuffham and Kirstin Ridley
LONDON, Feb 6 (Reuters) - Royal Bank of Scotland will pay $612 million to U.S. and British authorities to settleallegations it manipulated benchmark interest rates, and Britishregulators warned there is more to come in the globalinvestigation.
RBS became the third bank to pay fines in the Libor scandal.
The British bank, which is 82-percent-owned by the stateafter the world's costliest bank bailout in 2008, said onWednesday it was cutting bonuses to help pay for the fine, in abid to avoid a public backlash.
The bank fears the scandal will embolden critics who want itto further shrink its profitable investment bank and focus onbasic lending at home.
"What happened at RBS and other banks is totallyunacceptable," Britain's finance minister, George Osborne, toldreporters.
Britain's Financial Services Authority (FSA) signalled morelarge fines were in the offing.
"The size and scale of our continuing investigations remainssignificant," said Tracey McDermott, director of enforcement andfinancial crime at the FSA.
More than a dozen banks and brokerage firms, including JPMorgan, Deutsche Bank and Citigroup,are being investigated by regulators over the manipulation ofbenchmark interest rates such as the London interbank offeredrate, known as Libor, and Euribor, which are used to pricetrillions of dollars worth of loans.
For their roles in the Libor scandal, Switzerland's UBS agreed in December to pay penalties of $1.5 billion,and Britain's Barclays has paid $453 million.
Deutsche Bank has suspended five traders in connection withalleged manipulation of Euribor, a source familiar with thematter said on Wednesday.
Recent reports have raised the possibility of other banksresolving liability through a group settlement, but in aninterview on Wednesday a top U.S. Justice Department officialshot down that idea.
"Criminal cases are not resolved in a group setting," saidLanny Breuer, the head of the department's criminal division."We are going to go after each individual financialinstitution."
PURE MANIPULATION
Investigators said they discovered hundreds of attempts byat least 21 RBS employees in London, Singapore and Tokyo tomanipulate Libor. RBS traders aided dealers at other banks,including UBS, to rig the rates.
The abuse at RBS occurred from at least 2006 until late 2010- after some of the traders learned of the probe into Libor.
The FSA criticised RBS for seating derivatives traders nextto people who submitted Libor rates and said the bank's systemsand controls were flawed as recently as March 2012.
Like their peers at Barclays and UBS, RBS staff were blatantabout what they were doing in internal chatrooms, according toextracts of exchanges released by investigators.
A Swiss-franc trader at RBS told someone submitting rates toLibor that if he submitted them in the way he wanted, he would"come over there and make love to you."
A manager said "pure manipulation" was at work.
The U.S. Department of Justice said the near 300-year oldbank was guilty of a "stunning abuse of trust".
RBS is paying 87.5 million pounds ($137 million) to the FSA,$150 million to the U.S. Department of Justice and $325 millionto the U.S. Commodity Futures Trading Commission, whichregulates trade in derivatives.
A unit of the bank in Japan also pleaded guilty in theUnited States to one count of criminal wire fraud.
The parent company avoided criminal liability in the UnitedStates, meaning it can retain its banking licence there andavoid a fire sale of its U.S. business Citizens.
As part of its deferred prosecution agreement, the bank wasforced to admit and accept responsibility for its misconduct.
Lawyers expect a wave of civil lawsuits, potentially costingbanks tens of billions of dollars. It is unclear how manyindividuals will be prosecuted.
U.S. prosecutors have filed criminal charges against twoformer employees of UBS. Days before the Swiss bank was fined,British police and anti-fraud officers arrested one of thetraders later charged in the United States along with twoemployees of British brokerage firm RP Martin.
The U.S. Justice Department's Breuer said such inquiriescontinued. "As of today there are no individuals, but as you cantell, and we've demonstrated time again, this is an ongoinginvestigation," he said.
A SOAP OPERA
RBS Chief Executive Stephen Hester wants to re-establish thebank as a "normal" lender, shrinking the balance sheet by 700billion pounds and cutting thousands of jobs as he jettisons theprevious management's ambition for global domination.
Speaking to reporters in London, an emotional-looking Hesterfailed on three occasions to give a direct answer to questionson whether he had considered resigning over the Libor scandal.
"This has been a soap opera for four years," he said. "Thepeople who sit in judgment of us can dismiss us at any time ifthey feel that the bad bits get to be bigger than the goodbits."
Taxpayers are sitting on a loss of close to 16 billionpounds on their RBS stake, frustrating politicians.
Britain's influential parliamentary commission on bankingstandards has summoned Hester and RBS's chairman Philip Hamptonto discuss the Libor scandal and the future of the bank onMonday.
RBS said all but six of the 21 staff implicated had eitherbeen fired or had already left the bank. The remainder werebeing disciplined.
RBS will cut 300 million pounds from its bonus pool,including clawing back awards from previous years, to pay theU.S. fines. The UK penalty will be donated to charitable causes,including supporting soldiers and their families, the governmentsaid.
John Hourican, head of RBS's investment bank, is leaving atthe end of April after it was discovered the manipulation wenton after he took charge. He had no involvement in, or knowledgeof, the misconduct, RBS said. Hourican will receive a year'ssalary but forgo share awards.
"Libor is the railroad tracks on which our banking systemruns," Laura Willoughby, chief executive of consumer group MoveYour Money, said of the rate rigging. "RBS and other banks haveshattered trust in the very foundations of our financialsystem."
RBS shares finished up 1.36 percent at 342.1 pence.
($1 = 0.6382 British pounds) (Additional reporting by Laura Noonan, Andrew Osborn Tim Castleand Myles Neligan in London, and Douwe Miedema and ArunaViswanatha in Washington; Editing by Mark Potter, ElaineHardcastle and Leslie Adler)
