US Senator Carl Levin, who heads a powerful Senate panel looking into financial services, has accused Barclays and Deutsche Bank of helping hedge funds avoid taxes.

The US Senate Permanent Subcommittee on Investigations has said the two banks enabled at least 13 hedge funds to conduct over $100bn (£58bn, €74bn) in securities trades. The profits were taxed as long-term capital gains, even as the positions were often held for only seconds.

In particular, the banks sold complex option products to hedge fund Renaissance Technology that saved it an estimated $6.8bn in US taxes, Senator Levin has said.

Executives of the banks and Renaissance are to testify before the Senate on 22 July.

Pursued by Reuters, Barclays said it had been fully compliant with the law and that it had cooperated with the committee.

A Renaissance spokesman said: "We believe that the tax treatment for the option transactions being reviewed by the (panel) is appropriate under current law. These options provide Renaissance with substantial business benefits."

"Ordinary Americans had to shoulder a tax burden of billions of dollars, a burden that was shrugged off by these hedge funds," Levin said.

"And those same Americans will pay the price as the excess risk from massive over leveraging once again destabilises our economy as it has in the past," the Senator added, after his committee tabled the findings of a year-long investigation into so-called basket options, which Levin said can be misused to lower taxes.

The accusations against Barclays come less than a month after New York Attorney General, Eric Schneiderman, slapped a securities fraud lawsuit on the British lender, claiming the bank gained an unfair edge through its high frequency trading (HFT) practices.

Schneiderman based the lawsuit around internal communications provided by former employees.

Meanwhile, Deutsche Bank, facing investigations into the conduct of its staff that includes the Libor benchmark rate scandal, has put aside another €1.8bn to pay fines after shelling out over €5bn over the past two years.