The corruption of the world’s biggest currency dealers has been laid bare with regulators imposing fines of £2bn on five major banks for rigging the £3.5tn a day foreign exchange markets.

Regulators said they had found for a “free for all culture” rife on their trading floors that has allowed the markets to be rigged for five years.

The much-anticipated record settlement with US and UK regulators did not include Barclays, which remains in discussions with other regulators.

Each of the fines imposed on Royal Bank of Scotland, HSBC, Citibank, JP Morgan and UBS were records for the Financial Conduct Authority, smashing the penalties imposed over the past two years for Libor rigging.

The chancellor, George Osborne, said: “Today we take tough action to clean up corruption by a few so that we have a financial system that works for everyone. It’s part of a long term plan that is fixing what went wrong in Britain’s banks and our economy.”

Osborne will take a share of the fines for the Treasury and said they would be “-used for the wider public good.”

Announcing the first ever coordinated regulatory action, the FCA’s Tracy McDermott said: “Firms could have been in no doubt, especially after Libor, that failing to take steps to tackle the consequences of a free for all culture on their trading floors was unacceptable”.

The settlement was co-ordinated with the US regulator, the Commodities Futures and Trading Commission, which published transcripts of discussions with traders discussing foreign exchange rates. In one, a trader writes “dont want other numpty’s in mkt to know” and making remarks such as “nice job mate” and “yeah baby” as they discussed foreign exchange rates.

Traders at different banks formed tight-knit groups in which information was shared about client activity, including using code names to identify clients without naming them. These groups were described as, for example, “the players”, “the 3 musketeers”, “1 team, 1 dream”, “a co-operative” and “the A-team”.

Martin Wheatley, boss of the FCA, said the regulator would “not tolerate conduct which imperils market integrity or the wider UK financial system”.

He said: “Firms must make sure their traders do not game the system to boost profits or leave the ethics of their conduct to compliance to worry about”.

“Senior management commitments to change need to become a reality in every area of their business,” said Wheatley.

The Bank of England also published its report into whether its officials knew about the behaviour of traders. It concluded that there was no evidence that any official was involved in unlawful or improper behaviour but said there as an error of judgment by one official who knew that bank traders were sharing information.