£70m of the fine relates to attempts by Lloyds Bank and Bank of Scotland, both part of the group, to manipulate the amount they paid to the Bank of England for participating in the taxpayer-backed Special Liquidity Scheme.
Between April 2008 and September 2009, the banks artificially inflated their Repo Rate submissions to narrow the Repo Rate-LIBOR spread, thereby reducing the fees properly payable to the BoE.
An FCA spokesperson said the remaining £35m of the fine was paid for Lloyd's manipulation of LIBOR.
The group has since paid the BoE £7.76m in compensation for the reduction in SLS fees it received.
The regulator said that the firms’ manipulation of the Repo Rate was a type of misconduct that had not ever been seen before.
“Colluding to benefit the firms at the expense, ultimately, of the UK taxpayer was unacceptable,” said director of enforcement and financial crime at the FCA, Tracey McDermott. “The abuse of the SLS is a novel feature of this case but the underlying conduct and the underling failings are not new.
She added the firms benefitted greatly from the BoE through the SLS, which was launched to support UK banks during the financial crisis.
“If trust in financial services is to be restored then market participants need to ensure they are learning the lessons from, and avoiding the mistakes of, their peers.”
The regulator added that the firms had failed to “identify, manage or control” the relevant risks, and did not meet proper standards of market conduct.
The firms recieved a 30% discount for settling at an early stage, allowing them to avoid a total fine of £150m.
Last week, the FCA banned Financial Ltd and Investments Ltd from recruiting new appointed representatives and individual advisers for four and a half months.
The bans came because the firms “failed to ensure that their ARs ad individual advisers were adequately supervised and controlled to minimise the risk of mis-selling and the provision of unsuitable advice to consumers.”
Brian Galvin, chief executive of the two companies said he “regretted” that they had fallen short of expectations.
