European policymakers warned bankers yesterday to expect tougher regulation after a series of scandals had demonstrated the industry was incapable of policing itself. Nearly four years after bank dealings in subprime mortgages caused a global financial crisis, the sector’s image is again in tatters due to an interest rate rigging scandal and massive losses from bad trades including at UBS and Societe Generale. Joerg Asmussen, a member of the European Central Bank’s executive board, said efforts within the G20 group of leading economies to address problems in the sector had lost momentum and he urged a new drive to clean up banking. “The cumulation of misdeeds by individuals at big financial institutions shows that tougher regulations are needed,” he told an audience of bankers at a conference in Frankfurt. “Neither internal controls nor external oversight is working.” Asmussen said that if allegations in the Libor interest rate rigging affair proved true, the consequences for the industry were “unforeseeable”. British bank Barclays was fined a record $450mn after it admitted manipulating its submissions used to calculate Libor. Regulators believe rigging went far beyond the Barclays and are investigating most of the world’s largest banks. In Germany, which holds federal elections next year, all the major parties including Chancellor Angela Merkel’s Christian Democrats are preparing proposals to rein in banks. Finance Minister Wolfgang Schaeuble said on Monday he was looking into expanding the options for taking legal action against bank managers. He has also backed a European push to impose tighter curbs on bankers’ pay. Banks say the 27-nation EU already has the toughest pay limits in the world and new measures would put them at a disadvantage to their US and Asian rivals. From gulf times.