Banks in the United States and Europe are paying for misconduct that includes mis-selling U.S. mortgage bonds, rigging interest rates, and risky transactions such as JPMorgan's (>> JPMorgan Chase & Co.) "London Whale" trades.

Regulators across the globe are making banks dig far deeper than in the past for their misdeeds, led by U.S. authorities who have long been more aggressive and imposed penalties more than 10 times those meted out in Europe.

Fines and settlements paid to U.S. federal and state authorities have cost banks more than $40 billion this year, according to Reuters estimates, led by JPMorgan's record $13 billion payout last month to a number of regulators for mis-selling mortgage bonds.

European authorities handed out record fines of more than $3 billion. The bulk was due to the European Union's anti-trust regulator's record 1.7 billion euro ($2.3 billion) fine this month against six financial firms for manipulating Libor and Euribor benchmark interest rates.

Two trends are clear: regulators are slapping bigger fines on banks in an effort to clean up standards; and regulators appear to be working better with each other as they all strive to get a piece of any payouts.

"The level of cooperation and coordination between international regulators is an increasing threat to regulated firms," said Richard Burger, partner at British law firm RPC.

"There is enormous political pressure on every single regulator to be seen to be taking their pound of flesh when there is a regulatory failing that crosses borders," he said.

Many firms are also more willing to settle early to avoid political or public backlash and there is more reporting of misconduct and whistleblowing, industry sources said.

That is likely to leave banks facing the prospect of more big fines and settlements next year.

Banks still face scrutiny over a long list of issues in the United States, and when the European Commission imposed its interest rate settlement it vowed to keep probing rate-rigging.

RISING TIDE

Britain has fined banks and other financial firms and individuals 472 million pounds ($772 million) this year, up 50 percent from 2012 and the third consecutive record year.

Almost three-quarters of the payments stemmed from investigations conducted with overseas regulators, mainly in the United States, who also imposed hefty penalties.

Britain fined 45 firms or individuals, the lowest since 2009, but the average payment jumped to 10.5 million pounds, almost double a year ago and nine times the average of 2011.

Tracey McDermott, the British regulator's head of enforcement and financial crime, said firms had been told they needed to take a long term view about how to serve customers and markets and the fines levied were part of achieving that goal.

"The financial services industry has to move on from a culture where it rewards revenue generation above all else," she said.

Few other European countries levied fines. The Swiss financial regulator brought in 6.1 million Swiss francs ($6.8 million) from the disgorgement of profits from two cases, and the Dutch Public Prosecutor fined Rabobank 70 million euros ($95 million) alongside a settlement with U.S. and UK authorities for the manipulation of Libor.

Rabobank's payouts showed how countries differ. The bank paid out 774 million euros in fines - three-quarters sent to U.S. regulators, 16 percent sent to Britain and 9 percent was for its home regulator.

Payments in the United States are swelled by the large number of watchdogs involved, including national authorities such as Fannie Mae and Freddie Mac, the National Credit Union Administration (NCUA) and the energy market regulator, as well as individual states.

JPMorgan's mortgage bond settlement, for example, included a $2 billion civil penalty with the Justice Department, $1.4 billion to the NCUA, $4 billion in relief for consumers, and payouts to five states, including $299 million for California and $20 million for Delaware.

Its U.S. rivals Bank of America (>> Bank of America Corp) and Wells Fargo (>> Wells Fargo & Co) have also paid out billions of dollars and European rivals UBS (>> UBS AG), Deutsche Bank (>> Deutsche Bank AG) and Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) have also had hefty U.S. fines. ($1 = 0.8968 Swiss francs) ($1 = 0.7316 euros) ($1 = 0.6111 British pounds)

($1 = 0.7315 euros)

(Editing by Carmel Crimmins and Giles Elgood)

By Steve Slater