The UK government is braced for a fresh political backlash over bank bonuses as state- controlled Royal Bank of Scot- land prepares to pay as much as £250 million (€291 million) to staff at an investment banking division heavily implicated in the Libor-rigging scandal.

The bonus round comes just as RBS prepares to settle with US and UK regulators over the Libor scandal with a fine expected to top £500 million. Most of the fine will be paid to US authorities.

An ally of chancellor George Osborne said the bonus row would not be “as high octane” as in 2012, when controversy over chief executive Stephen Hester’s proposed £1 million bonus raged for weeks, but conceded that there would inevitably be a backlash. Mr Hester eventually turned down the bonus and has refused a possible payout this year.

Labour MP Pat McFadden said there would be “enormous anger if UK taxpayers pick up the tab for the individual sins of traders who were trying to rig Libor rates”.

RBS has drawn up plans to limit political fallout, including cutting the bonus pool and enforcing a double-clawback of bonuses. – Copyright The Financial Times Limited 2013