State-controlled Royal Bank of Scotland said yesterday it has dismissed employees over an interest rate rigging scandal but gave no indication of whether it would reach a settlement soon with investigating authorities.

Reporting a drop in first-half operating profit, RBS said it was cooperating with governments and regulators which are investigating the role of a number of banks in the setting of Libor and other inter-bank lending rates.

“The Libor situation is a stark reminder of the damage that individual wrongdoing and inadequate systems and controls can have in terms of financial and reputational impact,” chief executive Stephen Hester said.

RBS said it was being investigated by regulators in the United States, Britain and Japan and by competition authorities in Europe, the United States and Canada. However, it was not possible to measure reliably what effect the inquiries would have, including the timing and amount of fines or settlements.

“I think that the regulators must decide how they want to deal with the situation,” Mr Hester told reporters on a conference call. He added that he believed the Libor issue had been a result of “wrongdoing by individuals” rather than a “systemic problem” within the industry.

The announcement marked the first time RBS has confirmed it fired staff for misconduct in the Libor scandal, which has already cost Barclays chief Bob Diamond his job.

Sources said last month that RBS had fired four traders. They said Tan Chi Min, Paul White, Neil Danziger and investment adviser Andrew Hamilton were sacked at the end of last year. None was available for comment.

New details from court documents and sources suggest that groups of traders working at three major European banks, including RBS were heavily involved.

Mr Chi Min, the former head of delta trading for RBS in Singapore, was fired in November for allegedly trying to influence the banks’ rate setters improperly. He is suing RBS for unfair dismissal, alleging the practice of traders providing input to rate setters was widely known among senior managers at the bank.

Rival Barclays was fined $453 million last month by US and UK regulators after staff reported false interbank rates – the interest charged when banks lend to each other – that were above or below the real rates. Rates reported by a panel of banks are used to calculate Libor.

The Libor scandal has heaped pressure on Mr Hester, who was appointed CEO four years ago to rebuild the bank and its reputation following a bailout in 2008.

The bank also said yesterday the planned flotation of its insurance arm, Direct Line, was on track and planned for October. However, Mr Hester told reporters there was flexibility to delay it if market conditions were prohibitive.

“We have flexibility in the timetables so if market conditions are not right we have the ability to wait,” he said.

Direct Line has emerged as a target for private equity groups but finance director Bruce Van Saun said he believed an initial public offering was better value than an outright sale.

British government sources told Reuters on Thursday that it had no plans to nationalise RBS fully, contradicting a report in the Financial Times.

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