Any fines by US authorities on Royal Bank of Scotland over the Libor scandal should be met by bankers not taxpayers, Chancellor George Osborne has insisted.
A ruling on the involvement of RBS in the fixing of the key industry interest rate is due imminently.
It is expected to be higher than the fine of nearly £300m imposed on Barclays last year.
RBS, which is majority owned by the government, is now in final talks with US and UK authorities over Libor.
An announcement could be made within days. In effect, the fine imposed by the British financial authorities will be the UK taxpayer paying the UK taxpayer, but there has been concern over how the US fine was to be paid.
Senior sources at the Treasury said the chancellor had made it clear that the financial penalty imposed by American regulators must be covered by deductions from the bonuses of bankers at RBS.
These would be either clawed back from previous years or deducted from future bonus awards.
Two leading banks, Barclays and UBS, have reached settlements with regulators over their involvement with Libor (London Interbank Offered Rate), with fines of £290m and £940m respectively.
Libor tracks the average rate at which the major international banks based in London lend money to each other.
BBC business editor Robert Peston has said the talks include “other necessary remediation, including a possible senior resignation”.
But the bank’s board does not believe chief executive Stephen Hester needs to resign.