'Europe's banking system needs multi-million fines'

Michel Barnier, the European internal market commissioner, said penalties for market rigging and manipulation should be the same across Europe — citing the Financial Services Authority's multi-million-pound sanctions as the benchmark.

Barnier, who is expected to produce formal proposals next year, said the problem was that national penalties varied hugely across the EU with some as low as 150,000 (£127,000).

"We are dealing with something to do with whether people are respecting regulations, and if they are not, something needs to be done," he said in Brussels.

"We need good regulations which are respected, reinforced by harmonised penalties. There is a risk from financial institutions that do not respect the rules of the market place. Traders and those responsible must realise that they will be hit hard if there is malpractice."

Barnier said about seven EU countries handed out fines for financial malpractice at around 150,000, while some others impose sanctions of several million.

But the FSA recently imposed a fine of £17 million on Goldman Sachs for failure to reveal that it was under investigation by the American authorities.

Barnier said: "We are going to work hard at co-ordination. Member states will have some flexibility when it comes to applying sanctions. But there are good reasons for setting minimum sanctions on key issues so that they have a dissuasive effect".

Mr Barner said a system of minimum sanctions was the obvious follow-up to moves already made to bolster national financial supervision measures with a series of EU-level authorities.

"We are now supervising (financial institutions) more intelligently, building a whole (supervision) construction in Europe. Week by week we are putting more bricks in the wall, consulting and listening, because markets move more quickly than the political agenda.

"We have three (EU) supervisory bodies, plus supervision of systemic risk, with private equity and hedge funds being monitored. We are also looking at credit ratings agencies.

"Sometimes we forget what provoked the financial crisis, and it is important to get the construction in place to stop negative things happening again."