The bank had to pay a further £50m for the recent computer meltdown which saw thousands of RBS, NatWest and Ulster Bank customers locked out of their accounts, bringing the total provision to £175m.
UK and US authorities are now investigating the part-nationalised bank to see how it set Libor and other interest rates and it is expected to be one of the next to settle after rival Barclays was fined in June.
RBS expects to start talks on a settlement soon, which is likely to result in financial penalties.
The bank’s chief executive Stephen Hester said the timing of a settlement is in the hands of regulators. “We are up for settling with all and every one as soon as they are ready,” he said.
He added it is hard to say whether RBS will face a bigger fine than Barclays, the only bank to settle so far.
More than a dozen banks are under investigation by authorities in the US, Europe and Asia.
Even if the fine is smaller than Barclays’ penalty, Mr Hester said it would still be a “miserable day” for RBS.
“It is a deeply regrettable thing. This is the sort of thing the industry has to put behind it,” he said.
He expects details of a settlement to emerge between now and the group’s full year results next February.
“I’d be disappointed if we were talking to you at our full year results in February without having had more news, but it’s not under my control,” he said.
RBS has dismissed a number of employees for misconduct after its own investigations into interest rate setting.
Libor and other past mistakes are threatening to overshadow Mr Hester’s attempts to turn the bank around, which he said will be completed in the next 18 months.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “There is no doubting the immensity of the task RBS has faced in executing its turnaround plan, nor indeed the progress made so far.”
“The question now facing investors is whether the bank is an attractive proposition given the issues with which it continues to grapple,” he added.
RBS’s total bill for mis-sold PPI claims is now £1.7bn.
The group’s core businesses, which will become the ‘new’ bank once the turnaround is complete, reported a 67 per cent rise in operating profits in the third quarter to £1.6bn.
The non-core assets fell by a further £7bn to £65bn and have been reduced by 75 per cent to date, while its bad debt losses fell by £159m to £1.2bn.
Staff costs were five per cent lower than in the second quarter at £1.9bn, with headcount down by 9,900 from a year earlier.
RBS floated its insurance arm Direct Line Group in October, raising £911m from the sale of a 34.7 per cent stake.
The insurance group employs about 15,100 staff, with about a quarter of its workforce, around 3,750 staff, based in Yorkshire at sites in Leeds and Doncaster.
RBS also exited from the Government’s Asset Protection Scheme last month.
The group had a setback when the expected branch sale to Santander collapsed in the quarter, which it said was “disappointing”.
It has restarted efforts to sell the business.
“Our funding and capital position has been transformed, we have repaid all emergency loans from the government and central banks, and we have recently exited the Asset Protection Scheme without ever making a claim,” said Mr Hester.
“Economic pressures are restraining customer activity and as a result banks are running hard to stand still in this environment.
“Nevertheless, resilient core bank performance at RBS provides resources for customers and for our clean-up, whilst signposting shareholder value in future.”
The bank’s non-core assets fell £7bn to £65bn in the quarter and have been cut 75 per cent to date, while its bad-debt losses fell £159m from the previous quarter to £1.2bn.
RBS’s core tier one ratio – its capital reserves as a percentage of its loans – is now over 11 per cent against four per cent at the time of the 2008 collapse. Its loan to deposit ratio is 102 per cent against 154 per cent at the time of the crash.