The corruption of the world’s biggest currency dealers was laid bare on Wednesday when regulators imposed £2.6bn of fines on six major banks for rigging the £3.5tn-a-day foreign exchange markets.

Two UK and US regulators said they had found a “free for all culture” rife on trading floors which allowed the markets to be rigged for five years, from January 2008 to October 2013.

The much-anticipated record settlement 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 (FCA), smashing the penalties imposed over the last 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”.

In the UK, UBS was handed the biggest fine, at £233m, followed by £225m for Citibank, JPMorgan at £222m, RBS at £217m, and £216m for HSBC. Barclays has yet to settle. In the US, the regulator fined Citibank and JP Morgan $310m each, $290m each for RBS and UBS, and $275m for HSBC.

A second US regulator, the Office of the Comptroller of the Currency, also imposed separate fines on JP Morgan, Citi and Bank of America taking the day’s tally to £2.6bn.

Andrea Leadsom, a Treasury minister, said people who have done wrong “will not be back in a dealing room on a big salary” and “everything that can be done to punish this type of behaviour” will be done.

She told BBC Radio 4’s Today programme: “It’s completely disgusting. I think taxpayers will be horrified ... I don’t know if corruption is a strong enough word for it.”

Leadsom said it was particularly bad that this was going on at a time when taxpayers were bailing out the banks.

Announcing the first ever co-ordinated regulatory action, the FCA’s Tracey McDermott, director of enforcement and financial crime, 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 traders discussing foreign exchange rates on private chatrooms. In one, a trader writes “dont want other numpty’s in mkt to know”. The traders make remarks such as “nice job mate” and “yeah baby” as they discuss the 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”.

RBS chief executive Ross McEwan apologised to consumers: “To say I’m angry would be an understatement. We had people working in this bank who did not know the difference between right and wrong and put their interests ahead of clients.”

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 that “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”.

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

The Bank of England also published its report by Lord Grabiner into whether Threadneedle Street 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 was an “error of judgment” by one official who knew that bank traders were sharing information.

However, after trawling through emails, the Bank of England said its chief foreign exchange dealer – suspended since March – had been dismissed. “The individual’s dismissal was not at all related to the allegations investigated by Lord Grabiner, but as a result of information that came to light during the course of the Bank’s initial internal review into allegations relating to the FX market and Bank staff. This information related to the Bank’s internal policies, not to FX,” the Bank of England said.

RBS, 81% owned by the taxpayer, said it was continuing an investigation into the matter and is reviewing the conduct of 50 current and former employees, three of whom have been suspended. It pledged to make a public statement on the progress of the investigation by the end of the year.

“Today is a stark reminder of the importance of culture and integrity in banking and we will rightly be judged on the strength of our response,” said RBS’s outgoing chairman, Sir Philip Hampton. The bank pledged to look at clawing back bonuses and the impact on bonuses for “senior management”. No payouts of current bonuses will take place until the internal investigation is completed.

RBS had received complaints from two clients – in October 2010 and January 2012 – about the activities, and in November 2011 one of its traders raised concerns, which were not heeded.