British banks, including HSBC and Barclays, were Friday ordered to compensate businesses for "serious failings" over the sale of complex products, capping a scandal-hit week for lenders.
Britain's banks needed a "real change in culture" following a series of scandals that have rocked the country's financial sector in recent days, Bank of England (BoE) head Mervyn King told a press conference on Friday.
And British Prime Minister David Cameron, attending an EU summit in Brussels, kept up pressure on Barclays chief executive Bob Diamond, saying that probes into allegations of interbank rate manipulations must be seen through.
In London, regulator the Financial Services Authority (FSA) said it had reached agreement with Barclays, HSBC, Lloyds and Royal Bank of Scotland (RBS) "to provide appropriate redress" for mis-selling interest rate hedging products.
The affected banks issued statements stating that the due compensation would have little impact on earnings.
Far worse for Barclays was expected to be the fallout from record fines imposed on the bank for rigging interest rates. Also this week, a severe IT meltdown at bailed-out RBS left millions of customers unable to complete transactions.
RBS chief executive Stephen Hester on Friday said he would forgo his bonus this year because of the IT chaos.
"I think it is inappropriate for me to have a bonus this year. We have let our customers down," he told the BBC.
Anticipating a backlash over the rates rigging fines, Barclays' Diamond and other senior executives at the bank said on Wednesday that they would forgo their annual bonuses due for their work in 2012.
"It is vital that all investigations under way get to the bottom of what has happened, it is vital that they go wherever the evidence leads and hold those responsible to account without fear or favour," Cameron said on Friday.
Shares in Barclays plunged by as much as 17 percent on Thursday, wiping billions of pounds from its value, as Cameron and British finance minister George Osborne said the bank had "serious questions" to answer.
So far Barclays has ignored calls for Diamond to resign ahead of an appearance by the US national before British deputies likely next week to explain the inter-bank rates rigging scandal.
"We can see we need a real change in the culture of the (banking) industry," BoE Governor King said Friday.
"And that will require two things. One is leadership of an unusually high order and changes to the structure of the industry."
Earlier, the FSA said in a statement that it had "found serious failings in the sale of interest rate hedging products to some small and medium sized businesses."
It added: "We believe that this has resulted in a severe impact on a large number of these businesses. In order to provide as swift a solution to this problem as possible we have today confirmed that we have reached agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate redress where mis-selling has occurred."
British and US authorities on Wednesday said they had fined Barclays a total $452 million (363 million euros) amid probes into suspected manipulation by several banks of key markets for Libor and Euribor interest rates.
Barclays is the first major financial institution to settle with regulators following investigations on both sides of the Atlantic.
The rates concerned play a big role in international financial markets, and are linked to the level of borrowing costs passed on by banks to businesses and consumers for products such as mortgage loans.
Ed Miliband -- leader of Britain's main opposition Labour party -- has meanwhile called for a criminal investigation into the affair.
"With lawsuits and criminal charges likely, and other banks set to agree settlements in the coming months, this issue is not going away soon," said Rebecca O'Keeffe, head of investment at Interactive Investor.
"Barclays has a long way to go to reassure its customers and investors that its culture has changed," she added in a note to clients on Friday.
The rates rigging scandal is another massive blow to Britain's embattled banking sector after huge bailouts in the wake of the financial crisis -- and as lenders continue to massively compensate clients for mis-selling insurance.