EU will cut fines for banks to end its probe into Libor

The European Union is hoping to wrap up its investigation into the Libor-fixing scandal by offering banks the chance to settle with reduced fines, it emerged yesterday.

United States and UK regulators have hit Barclays, Royal Bank of Scotland and UBS for a combined $2.6bn (£1.7bn) for manipulating the inter-bank lending rate.

The EU's competition commissioner Joaquin Almunia wants to conclude his own investigation into Libor and the European equivalent Euribor before his term ends in 2014, sources in Europe said.

"It goes without saying that these inquiries are an absolute priority for the commission," Mr Almunia hinted in a speech yesterday. "If collusive practices are confirmed, it would represent a major attack on the development of healthy competition in financial markets."

If banks resist and the EU later eventually finds them guilty of manipulation, they could face a fine equivalent to 10 per cent of their annual revenue. At least a dozen banks and interdealer brokers are believed to be under the spotlight of the EU probe.

"We suspect the existence of cartels between certain actors in the market for derivative products – banks, but also brokers," he added. "These possible anti-competitive agreements consisting of manipulating rates could have allowed…unfair additional profits."

He is also hoping to resolve a two-year probe into Google.