An international response is needed over manipulation of the London Interbank Offered Rate (Libor) to ensure that cartel behavior is not possible, Sharon Bowles, Liberal Democrat MEP for South East England and chair of the European Parliament's Economic and Monetary Affairs Committee, told CNBC on Friday.
"I don't think it's just going to be a UK response," Bowels told "
"I'm wearing a European hat here as chair of the economic and monetary affairs committee of the European parliament and I am sure that commissioner [Joaquin] Almunia is going to be very interested in this."
"Previously we thought there are just about enough investment banks for us not to have huge market dominance issues and breaking up, but if you have a cartel as I said … it raises the questions here, it must raise the questions in the United States. I mean we would need an international response to this not just a UK one," Bowles added.
Barclays came out of the financial crisis relatively unscathed and it was praised for not needing a bailout from the UK government, which had to take majority stakes in Royal Bank of Scotland and Lloyds to keep them afloat.
But Bowles said banks were not supposed to do the hedging and then "farming it off" on small clients.
"I mean we always end up being up to our necks in it because we have got a lot of banks and therefore inevitably things happen here, but they've happened in the United States and I wouldn't be at all surprised to find that there has been possibly something going on in Europe as well," she said.
"So I think we need an international response and I think simplification and looking at: are banks in general too big to manage? I mean in the UK we've talked a lot about whether we need to have more competition on the retail side, I'm now beginning to think well what about the investment banking side too."
On Friday, the Financial Services Authority (FSA), the UK financial regulator, announced that banks would have to pay compensation to customers over mis-selling of interest rate swaps as well, adding that this had resulted in a "severe impact" on a number of businesses.
The agreement doesn't preclude more regulation for banks, Martin Wheatley, head of financial conduct at the FSA, told CNBC.
"I hope not. We never know," Wheatley said when asked by CNBC whether more regulation for banks will follow. "I can't guarantee that there can't be further action."
Economist Joseph Stiglitz earlier told CNBC that under-regulated and over-powerful banks risk weakening the economy and even undermining democracy.