The bank will pay $137 million to Britain's Financial Services Authority, $150 million to the U.S. Department of Justice and $325 million to the U.S. Commodity Futures Trading Commission, The Daily Telegraph reported Wednesday.
The fine is the second-largest to date in the growing scandal. Swiss bank UBS was fined $1.5 billion and British bank Barclays $454 million for attempting to fix the rate used as a benchmark for trillions of dollars in personal and commercial loans.
Banks manipulated the rate during the financial crisis in order to appear healthier than they were. Traders also manipulated the rate to profit on individual market bets.
RBS, which is 81 percent owned by British taxpayers, was faulted for situating traders close to the offices that were responsible for submitting figures that made up the Libor or London inter-bank offered rate, which is an average of interest rates banks charge when making loans to each other.
Bart Chilton, a commissioner at the CFTC said he was "amazed" to discover that RBS staff were manipulating the bank's submissions even after it became known that regulators were investigating the issue.
""Even after all of these Libor cases were being investigated, it is amazing that RBS employees tried to fly above the law," Chilton said.
"They acted as if they were the masters of the universe and the rules of fair play just didn't apply," he said.
RBS Chief Executive Officer Stephen Hester said he was ""disgusted" and "depressed" by the developments. The bank's pay pool would be reduced by $470 million due to the settlement, he said.
RBS said the bank was exonerated, as regulators faulted more than a dozen traders and their supervisors, but not the bank on the whole.
Emails released by the CFTC show how brazen some of the bank's employees were. "It's just amazing how Libor fixing can make you that much money," one trader wrote.
Referring to the Japanese yen, "The jpy Libor is a cartel now," another trader wrote.