A man looks at his watch as he stands outside the gates of the former headquarters and registered office of the Royal Bank of Scotland in Edinburgh Reuters

The global benchmark for bank interest rate markets looks set for fundamental changes as regulators around the world prepare new rules for its supervision and steeper punishments for its abuse.

European lawmakers heard testimony from the EU's anti-trust chief, Joaquin Almunia, its top regulator, Michel Barnier and the head of the US's Commodity Futures Trading Commission, Gary Gensler, as they considered major changes to the interest rate benchmark that underpins at least $500 trillion in financial securities and has shaken the global banking establishment to its very core. The testimony comes shortly before Martin Wheatley of the UK's Financial Services Authority is set to outline his recommendations for overhauling Libor supervision and governance later this week.

Lawmakers heard the case made for steep financial penalties in the case of interest-rate setting abuse - as much as 10 percent of global revenues for offenders - and possible prison time for individual market abusers. The industry itself, Almunia told the EU lawmakers in Brussels, including banks and brokerage firms, could face broader penalties for breaching cartel rules.

Gensler argued for a global benchmark based on interest rate transactions, as opposed to the current system of estimations, as EU regulators considered forcing banks to reveal the data behind the posted Libor and increase the number of banks that can participate in its fixing.

The renewed push for major changes in libor comes as new allegations surface in relation to alleged abuse at the Royal Bank of Scotland Group. Bloomberg News is reporting that senior RBS managers played a role in alleged Libor manipulation, citing instant messages from the head of the bank's yen products in Singapore to money market traders in London. Bloomberg also cites unnamed sources who say regulators are probing RBS's activities in yen, Swiss franc and US dollar Libor settings.

"Our investigations into submissions, communications and procedures relating to the setting of Libor and other interest rates are ongoing," an RBS spokesperson said when contacted by IBTimes UK. "RBS and its employees continue to cooperate fully with regulators."

RBS, which is 82 percent owned by the UK taxpayer, said last month it had dismissed a number of traders and employees in relation to on-going investigations into alleged libor manipulation. The bank said it has been named as a defendant in "a number" of legal actions stemming from the probe in the United States but that it could not measure what affect they may have on the banks finances in terms of fines paid or settlements agreed.

"The Libor situation is on our agenda and is a stark reminder of the damage that individual wrongdoing and inadequate systems and controls can have in terms of financial and reputational impact," RBS said. "This is the subject of on-going regulatory investigation but our customers and shareholders should be in no doubt that we are taking it seriously. These issues together are hard to deal with but just as necessary a part of change from the past as the restructuring of our balance sheet. "

More than a dozen of the world's biggest financial institutions have been implicated in the scandal, however only one firm, Britain's Barclays, has admitted wrongdoing and paid compensation in the form of a £290m fine last spring. The revelations that followed eventually cost the careers of its chief executive, Bob Diamond, and its chairman, Marcus Agius and threatened the reputation of one of the most senior figures at the Bank of England, Paul Tucker.

Morgan Stanley analyst Huw Van Steenls, in a report published in July, estimates litigation risk associated with the various Libor investigations could cost the industry as much as $6bn. RBS chief Stephen Hester, speaking Tuesay at a Bank of England Merril Lynch banking conference in London, said the cost of rectifying previous misconduct at the bank was "very unpredictable".