A draft law promises a stricter code of penalties not just for banks, but also for individual bankers, if they hide information from regulators or break rules capping the amount of cash paid in bonuses.
It would set the bar higher for fines in Europe and add to momentum for increased penalties in countries that were lax in regulating banks before the financial crisis, such as Ireland, as well as the region's biggest economic power, Germany.
In one of the most far-reaching reforms since bonus curbs were imposed on European bankers, officials working for the EU's top regulatory official, Michel Barnier, have outlined plans to standardise such fines, according to Reuters.
They describe a new EU code that would allow EU countries to fine individual bankers up to five million euros or 10% of their pay and bonus - whichever is higher.
The document also proposes powers for national authorities to penalise banks by up to 10% of turnover.
The rules, if made law, would far outstrip the powers of regulators in Ireland, who cannot impose a fine of more than 500,000 euros on individuals, and even Germany, where the maximum penalty on an institution is one million euros.
Britain's Financial Services Authority, however, is already able to impose unlimited penalties on banks or their employees and last year fined JP Morgan 33 million pounds for failing to separate clients' money from its own.
It has also fined two managers at Northern Rock for playing down the extent of the lender's problems, although the 504,000 pounds penalty given to former deputy Chief Executive David Baker was only a fraction of what is proposed in rules from the European Commission.
Officials hope EU sanctions would give extra bite to reforms to control finance as well as discourage banks from relocating to countries with softer rules, as Germany's Depfa did with a move to Dublin before later needing a state bailout to avoid collapse.
"A manager of a bank could be sanctioned when he is responsible for a violation, for instance, in case he deliberately decided not to report disadvantageous financial information to supervisors," said one official with knowledge of the proposal.
"In most cases sanctions will be imposed also on the bank."
EurActiv with Reuters
