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The part-nationalised bank will be fined by authorities in Britain and the United States for the attempted manipulation of the London interbank offered rate (Libor) and other key benchmark rates. Reports have said it could also face criminal charges.
Chief Executive Stephen Hester has warned of a "miserable day" for the bank, with the contents of embarrassing email communications exposing the extent of collusion between traders set to be revealed.
The settlement comes with Britain's banks under intense scrutiny following a raft of scandals, which also include the mis-selling of loan insurance and complex interest rate hedging products and breaches of anti-money laundering rules.
Britain's Finance Minister George Osborne has already tapped into the political sensitivity around the issue, saying this week that RBS's fines must be paid out of bankers' bonuses rather than from the pockets of taxpayers.
The revelations could put the future of RBS's investment bank under renewed scrutiny and are likely to re-ignite calls from political factions who want the 81% state owned lender to focus on its domestic market.
John Hourican, head of RBS's investment bank, is expected to part company with the bank following the settlement.
Taxpayers are currently sitting on a loss of about 15.7 billion pounds after Britain pumped in 45.5 billion to keep the bank afloat at the height of the 2008 financial crisis.
RBS will be the third bank to settle with regulators investigating the affair. Its punishment will be greater than the $450 million fines paid by British rival Barclays but well short of the record $1.5 billion fines handed out to Switzerland's UBS.
More than a dozen banks around the world have been scrutinised by regulators as part of an investigation into the suspected rigging of interbank rates, which are used to price trillions of dollars of financial instruments.
