Six firms are saidto have been in talks with the Financial Conduct Authority (FCA) to reach a settlement over the alleged misconduct relating to the ￡3 trillion-a-daymarket.

Reports suggest each bank could face a penalty of between ￡225 million and ￡250 million, adding up to around ￡1.4 billion in total.

This would dwarfthe ￡532 million in penalties imposed by the regulator on banks and City brokers over the previous big regulatory scandal involving the manipulation ofthe interbank lending rate, Libor.

In addition to the FCA settlements, the banks are also likely to face penalties from USregulators. An announcement is being targeted for today, although last-minute discussions could see the timetable slip by a few days.

Fines by global authorities over Libor have totalled billions of pounds, but FCA chief executive Martin Wheatley has said the forex allegations are "every bit asbad".

The six banks reported to have been in talks with the regulator over a settlement are HSBC,Barclays, Royal Bank of Scotland,Citigroup, JP Morgan Chase and UBS.

HSBC last week saidit had set aside ￡236 million to cover the FCA probe - which would represent a record penalty by the body.

Barclays and RBS said previously they were putting aside ￡500 million and ￡400 million amidglobal investigations into the scandal but were not specific about how much was accounted for by the UK regulator.

Meanwhile,Switzerland's UBS has set aside 1.8 billionfrancs (￡1.2 billion) and America's Citigroup has taken a 600 million US dollar (￡375 million) hit to cover regulatory and litigation issues.

JP Morgan Chase said last week it had boosted its war chest for legal expenses by 1.3 billionUS dollars (￡821 million) after the US Department of Justice opened a probe into the bank's forex business.

Meanwhile a seventh firm, Bank of America, said it was taking a 400 million US dollar (￡252million) charge for litigation costs in the third quarter.

The expected record fine over the forex scandal will add to the large sums the FCA has collected over Libor.

Much of the money has been allocated to charities, including military groups.