Banks pay for past sins as US, Europe levy record fines

* U.S. fines, settlements over $40 billion

* European fines top $3 billion after EU Libor charge

* Banks suffer from Libor, Whale, U.S. mortgages settlements

* International co-operation by regulators adds pressure

By Steve Slater

LONDON, Dec 24 (Reuters) - U.S. and European regulatorsfined banks record amounts this year, imposing penalties andsettlements of more than $43 billion as authorities work moreclosely across borders to clean up the financial sector.

Banks in the United States and Europe are paying formisconduct that includes mis-selling U.S. mortgage bonds, rigging interest rates, and risky transactions such asJPMorgan's "London Whale" trades.

Regulators across the globe are making banks dig far deeperthan in the past for their misdeeds, led by U.S. authorities whohave long been more aggressive and imposed penalties more than10 times those meted out in Europe.

Fines and settlements paid to U.S. federal and stateauthorities have cost banks more than $40 billion this year,according to Reuters estimates, led by JPMorgan's record $13billion payout last month to a number of regulators formis-selling mortgage bonds.

European authorities handed out record fines of more than $3billion. The bulk was due to the European Union's anti-trustregulator's record 1.7 billion euro ($2.3 billion) fine thismonth against six financial firms for manipulating Libor andEuribor benchmark interest rates.

Two trends are clear: regulators are slapping bigger fineson banks in an effort to clean up standards; and regulatorsappear to be working better with each other as they all striveto get a piece of any payouts.

"The level of cooperation and coordination betweeninternational regulators is an increasing threat to regulatedfirms," said Richard Burger, partner at British law firm RPC.

"There is enormous political pressure on every singleregulator to be seen to be taking their pound of flesh whenthere is a regulatory failing that crosses borders," he said.

Many firms are also more willing to settle early to avoidpolitical or public backlash and there is more reporting ofmisconduct and whistleblowing, industry sources said.

That is likely to leave banks facing the prospect of morebig fines and settlements next year.

Banks still face scrutiny over a long list of issues in theUnited States, and when the European Commission imposed itsinterest rate settlement it vowed to keep probing rate-rigging.

RISING TIDE

Britain has fined banks and other financial firms andindividuals 472 million pounds ($772 million) this year, up 50percent from 2012 and the third consecutive record year.

Almost three-quarters of the payments stemmed frominvestigations conducted with overseas regulators, mainly in theUnited States, who also imposed hefty penalties.

Britain fined 45 firms or individuals, the lowest since2009, but the average payment jumped to 10.5 million pounds,almost double a year ago and nine times the average of 2011.

Tracey McDermott, the British regulator's head ofenforcement and financial crime, said firms had been told theyneeded to take a long term view about how to serve customers andmarkets and the fines levied were part of achieving that goal.

"The financial services industry has to move on from aculture where it rewards revenue generation above all else," shesaid.

Few other European countries levied fines. The Swissfinancial regulator brought in 6.1 million Swiss francs ($6.8million) from the disgorgement of profits from two cases, andthe Dutch Public Prosecutor fined Rabobank 70 million euros ($95million) alongside a settlement with U.S. and UK authorities forthe manipulation of Libor.

Rabobank's payouts showed how countries differ. The bankpaid out 774 million euros in fines - three-quarters sent toU.S. regulators, 16 percent sent to Britain and 9 percent wasfor its home regulator.

Payments in the United States are swelled by the largenumber of watchdogs involved, including national authoritiessuch as Fannie Mae and Freddie Mac, the National Credit UnionAdministration (NCUA) and the energy market regulator, as wellas individual states.

JPMorgan's mortgage bond settlement, for example, included a$2 billion civil penalty with the Justice Department, $1.4billion to the NCUA, $4 billion in relief for consumers, andpayouts to five states, including $299 million for Californiaand $20 million for Delaware.

Its U.S. rivals Bank of America and Wells Fargo have also paid out billions of dollars and Europeanrivals UBS, Deutsche Bank and Royal Bank ofScotland have also had hefty U.S. fines.