Banks in Ireland, Belgium, Portugal and Finland could face fines for colluding on fixing charges for converting the euro into national currencies and for cross-border transaction fees in the euro zone. The European Commission is sending out warning letters to 120 banks and banking federations in those countries.

Mr Mario Monti, the EU's competition commissioner, told the European parliament two weeks ago that if the banks were involved in price-rigging, it would be a "serious infringement of competition rules". The Commission has the power to fine companies up to 10 per cent of their global turnover in serious cartel cases, but has never imposed fines this high.

The Commission says it has sent out the letters - statements of objections - to one of the countries involved so far. The others are expected to follow this week. The letters contain the Commission's reasons for suspecting the banks are operating a cartel. The banks have two months to reply before Mr Monti takes any further action.

The Commission mounted its investigation in February last year when inspectors raided a number of banks across the euro zone. Among the banks raided were Banque Bruxelles Lambert and KBC in Belgium as well as the Belgian banking federation and Allied Irish Bank and Bank of Ireland in the Republic.

Mr Monti's department decided to investigate the banks after complaints from the public and the European parliament suggesting that banks had agreed not to compete on costs for currency exchange and cross-border transfers. The charge came even though banks had said they would not charge their customers for services related to the transition to the euro.