Swiss banking giant UBS could pay a fine of more than $1 billion to settle allegations that it manipulated Libor interest rates, the Financial Times reported on Thursday.

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"The settlement could be made public as early as Monday," the British financial daily said citing people familiar with the investigation.

UBS declined to comment on the FT report when contacted by AFP.

UBS was the first bank to reveal problems in the rate-setting process of the Libor, otherwise known as the London Interbank Offered Rate, which sets the rate at which banks lend money to each other and also affects a vast range of contracts around the world.

In June, British bank Barclays was fined $452 million by British and US regulators for attempted manipulation of interbank rates between 2005 and 2009.

The Libor system was found to be open to abuse, with some traders lying about the rates to boost positions or make their groups seem more secure.

Barclays is the only bank to have been fined so far, but it is understood that about 20 banks globally are being investigated for possible Libor manipulation.

State-rescued Royal Bank of Scotland has already said that it hopes to settle any claims after warning that it could face significant financial penalties.

RBS, which is 81-percent owned by the government after a huge bailout, has dismissed a number of employees for misconduct as a result of its own investigations.

Back in October, the British government announced plans to make it a criminal offence to rig Libor, backing the findings of a major report into the scandal.

The Financial Services Authority (FSA) — the nation's finance regulator — had recommended in September that the Libor interest rate receive a "complete overhaul" in the wake of the notorious affair.

Industry body the British Bankers' Association will be stripped of its role in setting Libor, with the oversight process handed to a new group.
 
Britain's government has said that it will seek to change the law and introduce the Libor reforms as soon as possible.