Taxpayer-backed Royal Bank of Scotland (RBS) sacked four of its traders at the end of last year over their alleged role in the Libor-fixing scandal, sources have said.
The revelation comes after the bank confirmed it is being investigated for manipulating the rates at which banks lend to each other.
Two of the traders were removed from their posts in October and a third the following month. RBS has not commented on the sackings.
The RBS revelation comes amid speculation over the scale of the rate-rigging probe in the UK and internationally in the wake of the Barclays settlement last Wednesday. Barclays boss Bob Diamond is preparing to face a panel of MPs over the controversy this Wednesday. He has so far resisted pressure to resign.
Calls are mounting for criminal proceedings to be taken against anyone found to have manipulated the Libor interbank lending rate. Ministers have also announced an independent review into the inter-bank lending rate after the rigging scandal, but a wider inquiry into the banking industry has been urged by Labour leader Ed Miliband.
The Government said the independent review will consider the future operation of the so-called Libor rate and the possibility of introducing criminal sanctions for its manipulation. Treasury sources said its review would ensure a speedy response to the issue, resulting in amendments to the Financial Services Bill this summer.
Ministers are considering setting up a separate review into the professional standards of bankers. But Mr Miliband insisted the public would not accept anything less than a full-scale independent inquiry into the culture and practices of banking.
Barclays was fined £290 million by UK and US regulators for manipulating the rate at which banks lend to each other in the first of two scandals to rock the City this week.
On Friday, the FSA revealed separately that Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group had agreed to pay compensation to customers who were mis-sold interest-rate hedging products.
Some 28,000 of the products have been sold since 2001 and may have been offered as protection - or to act as a hedge - against a rise in interest rates without the customer fully grasping the downside risks. Serious Fraud Office investigators are in talks with the regulator over the scandal.