The chairman of Lloyds Banking Group has admitted the company's manipulation of key interest rates was "truly shocking".
The company has been slapped with a £218m fine from US and UK regulators for manipulating the LIBOR inter-bank rate and the Repo Rate.
The Repo Rate was the benchmark used by the Bank of England to calculate how much banks paid to take part in the Government's Special Liquidity Scheme (SLS) to support banks during the financial crisis.
Lloyds chairman Lord Blackwell has replied to a highly critical letterwritten to him by the Bank of England's governor, Mark Carney.
"I absolutely share your concern about the nature of the SLS conduct, and in particular its implication for reducing fees," Lord Blackwell wrote.
"This was truly shocking conduct, undertaken when the Bank was on a lifeline of public support."
He also agreed that Lloyds would pay nearly £8m back to the Bank of England for fees it should have paid for the SLS.
The governor of the Bank of England has warned that Lloyds and its subsidiary Bank of Scotland could face "further action" over the manipulation of benchmark interest rates.
In a letter to Lloyds chairman Lord Blackwell, Mark Carney said the BoE's Prudential Regulatory Authority would now consider whether to take further steps.
"In view of the seriousness of this matter, the PRA will consider whether further action should be taken in relation to the Firms or individuals at the Firms."
The banks have been fined for manipulation of the LIBOR rate and Repo Rate.
Bank of Scotland was formerly part of HBOS, which was taken over by Lloyds in 2009.
The governor of the Bank of England has strongly condemned Lloyds Banking Group for its attempts to manipulate two key interest rates.
Part of Lloyds' £218m fine from US and UK regulators relates to its attempts to reduce the fees it paid to the Bank of England for the Special Liquidity Scheme - a government programme to help struggling banks during the financial crisis.
The Bank of England has now published a letter from governor Mark Carney to the chairman of Lloyds, Lord Blackwell.
"Such manipulation is highly reprehensible, clearly unlawful and may amount to criminal conduct on the part of the individuals involved," Mr Carney wrote.
About £70 million of Lloyds' fine from financial regulators is for trying to manipulate the fees payable to the Bank of England for taking part in a government scheme to support British banks during the financial crisis.
The group is set to pay a total of £218 million to UK and US authorities after it became the latest lender to be punished over the rigging of interest rate benchmarks.
Lloyds said the manipulation took place between May 2006 and 2009, adding that those involved have either left the company, been suspended or are subject to disciplinary proceedings.
Barclays was the first to settle Libor rate-rigging claims, paying £290 million in penalties to US and UK regulators in June 2012, while state-backed Royal Bank of Scotland was hit with a £391 million settlement.
Lloyds Banking Group has agreed to pay fines worth £218 million to UK and US regulators in relation to the manipulation of Libor.
The US authorities have charged the bank with "manipulation, attempted manipulation and false reporting of Libor" between April 2008 and September 2009.
The firms manipulated the benchmark interest rate at which banks lend money to each other in order to reduce the amount it paid in fees to Bank of England.
Fines levied over the Libor scandal will be given to military charities.
George Osborne said that this will also be extended to search and rescue and £10 million will go to the Guides, cadets and St John's Ambulance.
The Chancellor told MPs that inheritance tax relief will be given to the families of those in the emergency services who die while on duty.
In his Autumn Statement earlier this month, George Osborne announced a further £100 million of Libor fines would be made available "to reflect our society's debt of gratitude to our servicemen and women, and their families".
Here's how the money is distributed:
George Osborne described those involved in the Libor rate-rigging scandal as "people who demonstrated "the worst of the values in our society".
I am delighted to be able to announce more money for those who are supporting our brave armed forces, veterans and their families.
It is right that money paid in fines by people who demonstrated the worst of the values in our society is now being used to help and support those who demonstrate the very best.
More than £12 million in fines levied on City rate-riggers will be shared by 24 military charities and good causes.
The latest allocation of funds from the Libor fines pot will be used to fund projects including housing and mental health support schemes for veterans.
Today's announcement means that the £35 million fund has been used to support 96 armed forces charities and good causes.
Labour are calling for Michael Spencer - whose firm ICAP was fined in the Libor scandal - to be banned from the Conservative Party conference.