Royal Bank of Scotland (RBS) has been fined £390m ($610m) by UK and US authorities for its part in the Libor rate-fixing scandal.

The UK’s Financial Services Authority issued a fine of £87.5m, while about £300m will be paid to US regulators and the US Department of Justice.

The fines are £100m greater than those issued to banking rival Barclays last year for similar offences.

RBS chairman Sir Philip Hampton said it was a “sad day” for the bank.

Chancellor George Osborne called the behaviour of traders “totally unacceptable” and said the bank, rather than taxpayers, would be paying the fines.

RBS is still 81% owned by the taxpayer, four years on from a massive government bailout.

The bank said that the £300m owed to US authorities would be paid using money clawed back from bonuses already paid, and reductions to future bonuses.

Last year Barclays was fined £290m and Swiss bank UBS will pay out £940m to regulators for its Libor manipulation offences.

RBS said it had uncovered wrongdoing by 21 employees, who had now been disciplined or left the bank.

“There were serious shortcomings in our systems and controls and also in the integrity of a small group of our employees,” Sir Philip said in a statement.

“We have to fix the culture in the banking industry… the board has used all means possible to ensure the gravity of this issue is reflected in the remuneration received by employees.”

Speaking to the BBC, chief executive Stephen Hester said the wrongdoing by a small number of individuals needed to be “a part of RBS’s past and not its future”.

“We must be absolutely clear – this is not acceptable,” he said. “The journey of recovering from its past legacy is not finished.”

The FSA revealed that the bank qualified for a 30% discount on its fine because it agreed to settle at an early stage of the investigation. Without the discount the fine would have been £125m.

It said the misconduct at RBS was “widespread” and had involved “a number of employees and occurred over a number of years”.

Investigators found that RBS traders colluded with other traders to try to fix Libor rates between 2006 and 2010.

The practice was designed to make money by investing in interest rate swaps – financial instruments which allow you to bet on interest rates, which can be influenced by the Libor rate.

At RBS, traders in multiple offices around the world were involved, including London, Singapore and Tokyo. They focused on the manipulation of yen and Swiss franc Libor rates, using instant messaging systems to communicate with other traders.

According to the US Commodity Futures Trading Commission (CFTC), which hit RBS with a £208m fine, RBS made hundreds of attempts to manipulate the rates and succeeded on a number of occasions.

It said Libor rate-fixing continued at RBS, even after traders learned that regulators had opened investigations into the bank.

RBS’s Japanese subsidiary has pleaded guilty to one count of wire fraud relating to the manipulation as part of the settlement with US regulators.

The bank has entered into a deferred prosecution agreement with the US Department of Justice on other charges.

The head of RBS’s investment banking arm, John Hourican, will also leave the bank, it has been confirmed.

The case is another blow to RBS, which is still recovering from the financial crisis that left it on the verge of collapse in 2008.

More than four years on from a massive government bailout, the bank is still 81% owned by the taxpayer.

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