Financial regulators in three countries fined Tuesday Dutch Rabobank 774 million euros ($1.1 billion), the latest bank to be engulfed by the the Libor rate-fixing scandal.
Rabobank chairman Piet Moerland (left), and chief financial officer Bert Bruggink give a press conference on February 28, 2013 in Utrecht
The Financial Conduct Authority has fined Rabobank for "serious, prolonged and widespread misconduct" relating to Libor, Britain's FCA said, echoing rulings from US and Dutch authorities.
Libor, or the London Interbank Offered Rate, is a global benchmark that is calculated daily, using estimates from banks of their own interbank rates.
It underpins the terms of $500 trillion of contracts from mortgages to the cost of corporate lending.
However, the system has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure.
Rabobank had for almost six years between May 2005 and January 2011 allowed money market traders to manipulate Libor submissions to benefit foreign currency trading positions, the FCA said.
Traders also colluded with "individuals at other Libor panel banks and interdealer firms to influence Libor submission, the FCA said.
"Rabobank's misconduct is among the most serious we have identified on Libor," added Tracey McDermott, the FCA's director of enforcement and financial crimes.
The Netherlands' second-largest bank's "poor internal controls encouraged collusion between traders and Libor submitters and allowed systematic attempts at benchmark manipulation," the FCA added.
"Rabobank did not fully address these failings until August 2012, despite assuring the FCA in March 2011 that suitable arrangements were in place," the statement added.
In response Rabobank said it has "entered into settlements with various authorities and agreed to pay 774 million euros."
Group chairman Piet Moerland also resigned "with immediate effect," the bank said in a statement.
"During the period in which the inappropriate conduct occurred Rabobank did not sufficiently appreciate the risks associated with the Libor and Euribor submission processes and we regret this," said Moerland.
Eurogroup chairman and Dutch Finance Minister Jeroen Dijsselbloem on Tuesday said "shameless fraud was committed by money market traders, miles away from the cooperative ideals of Rabobank."
Rabobank is a cooperative and prides itself on its ethics and integrity.
"The Libor affair renews the mistrust in the financial sector," Dutch news agency ANP quoted him as saying.
The US Commodity Futures Trading Commission (CFTC) said that Rabobank would pay it $475 million after it "pervasively rigged key interest rate benchmarks".
“Unfortunately, we once again see how the public trust can be violated through bad actors readily manipulating benchmark interest rates," CFTC Chairman Gary Gensler said.
The Libor scandal erupted last year when British bank Barclays was fined pound sterling290 million by British and US regulators for attempted manipulation of Libor interbank rates and eurozone equivalent Euribor between 2005 and 2009.
Rabobank, headquartered in the central city of Utrecht, is the fifth bank to settle with financial authorities and the fine is the second-largest to be imposed after the 1.4 billion Swiss francs (1.1 billion euros, $1.5 billion) penalty slapped on UBS last year.
London has already announced it will take calculation of Libor away from the British Banker's Association and hand it to NYSE Euronext beginning early next year, the owner of the New York Stock Exchange.
The European Commission in September unveiled plans to better regulate key financial benchmarks such as Libor and Euribor in the wake of the scandal.
The plan aims to bring some measure of central supervision to a system that until now was largely run and supervised by the banks themselves and will be overseen by national administrators working in tandem with the Paris-based European Securities and Markets Authority.
“Benchmarks are at the heart of the financial system: they are critical for our markets as well as the mortgages and savings of millions of our citizens, yet until now they have been largely unregulated and unsupervised," EU Financial Markets Commissioner Michel Barnier said last month.
Barclays, Royal Bank of Scotland, UBS and British broker Icap have already paid huge fines to British and US authorities, but Barnier said he believed some bankers "should have gone to prison".
Under his plans, which have to be approved by the 28 EU member states and the European Parliament, benchmark rates "will be subject to prior authorisation and on-going supervision at national and European level."
They would also require that the information used to calculate a benchmark was indeed accurate, reflecting the true cost of money in the market.