Commonwealth Bank has agreed to pay $25 million to settle an interest rate-rigging case brought by ASIC.

Key points: CBA admits it engaged in "unconscionable conduct" by attempting to rig a key market interest rate

CBA admits it engaged in "unconscionable conduct" by attempting to rig a key market interest rate The bank will pay $25 million, which includes a penalty, ASIC's legal costs and contribution to a consumer financial protection fund

The bank will pay $25 million, which includes a penalty, ASIC's legal costs and contribution to a consumer financial protection fund Its third-quarter results disappoint with regulatory and compliance issues driving up costs, while revenue remained flat

As part of the in-principle settlement, CBA will admit that it attempted to engage in unconscionable conduct, and manipulated the bank bill swap rate (BBSW) five times between February and June 2012.

The figure includes a $5 million penalty, a $15 million payment to a financial consumer protection fund, and $5 million towards ASIC's legal costs.

The CBA case is one of several brought by ASIC against the big four banks, as well as a number of global investment banks, over their attempts to rig the BBSW.

The BBSW is the key rate the market uses to set all other lending rates, such as mortgages and credit cards.

ASIC alleged "CBA traded with the intention of affecting the level at which BBSW was set so as to maximise its profits or minimise its losses to the detriment of those holding opposite positions to CBA's".

"It was unconscionable for CBA to trade in this way, and also to enter into products priced off the BBSW without disclosing its trading practices to its customers and counterparties," ASIC said in its original statement of claim.

The action, if successful, would have created false prices across the market.

The payout is half the $50 million ANZ and NAB agreed to, reflecting the far fewer charges CBA was facing.

In approving the ANZ and NAB settlements in the Federal Court last year, Justice Jayne Jagot delivered a scathing assessment of the banks' conduct, saying the public would be "shocked, dismayed and disgusted" by their behaviour.

Westpac split with the other banks and chose to fight ASIC's charges in the Federal Court rather than settle.

A decision on the Westpac case is still pending.

CBA and ASIC will make an application to the Federal Court for the deal to be approved.

CBA's legal and regulatory costs mounting

CBA's mounting list of legal and regulatory problems has started to hit its bottom line.

In delivering a disappointing third quarter trading update, CBA said its costs had risen around 3 per cent due to "increased provisions for regulatory [and] compliance spend".

Bank analysts suggest that translates to an extra $150 million.

The CBA's overall cash earnings for the quarter came it an $2.35 billion, down 2 per cent on a year ago and well below market expectations.

The bank also reported an increase in troubled and impaired assets over the March quarter, up $600 million to $6.6 billion.

"The has been an uptick in home loan arrears, influenced by a small number of customers experiencing difficulties with rising essential costs and limited income growth," CBA said in a statement to the ASX.

The CBA also noted the drag posed by $1 billion extra "operational risk" capital APRA required it hold over the money laundering scandal would be more than offset by the sale of life insurance business later this year.