Barclays Banking Scandal: Inter-Bank Review To Be Set Up In Wake Of Libor Revelations

Minister To Order Inter-Bank Review Following Libor Scandal

Ministers are to order an independent review into the inter-bank lending rate in the wake of revelations that it was rigged by bankers.

And Bob Diamond, the under-fire Barclays chief executive facing calls for his resignation, has been summoned to appear before the Treasury Select Committee on Wednesday.

The review will consider the future operation of the so-called Libor rate and the possibility of introducing criminal sanctions for its manipulation.

MIliband has called for a 'full public inquiry'

The move did not satisfy Labour, however, whose leader Ed Miliband insisted the public would not accept anything less than a full-scale independent inquiry into the culture and practices of banking.

His call came after the Financial Services Authority uncovered "serious failings" in the sale of complex financial products to small businesses, just days after the rate-rigging affair emerged at Barclays.

Taxpayer-backed Royal Bank of Scotland has also confirmed it is being investigated for manipulating the rates at which banks lend to each other.

Treasury sources said its review, to be headed by an as-yet-undisclosed independent figure, would ensure a speedy response to the issue, resulting in amendments to the Financial Services Bill this summer.

Ministers are considering setting up a separate review into the professional standards of bankers.

Prime Minister David Cameron said the Government would ensure "the criminal law can go wherever it needs to".

Asked about calls for a wide-ranging inquiry, he said: "Let's take our time, think this through carefully... That's what I'm determined to do, and that's what we will do."

But Miliband said the Prime Minister was "out of touch" and warned that voters would not accept "the establishment closing ranks".

He called for an inquiry along the lines of Lord Justice Leveson's into media ethics and practices.

"I have news for David Cameron - the people of this country want a moment of reckoning for our banks," he told a Fabian Society conference in London.

"The British people will not tolerate the establishment closing ranks saying we don't need an inquiry.

"They want a light shone into every dark corner of our banking system. They want bankers held to account. They want the system rebuilt.

"Nothing less than a full public inquiry can do that. Sticking-plaster solutions will not heal this wound."

Justice Secretary Ken Clarke admitted that financial crime was "easier to get away with" than virtually any other misdemeanours.

"We are very bad at prosecuting financial crime in this country," he told the BBC Radio 4 Today programme.

"I suspect financial crime is easier to get away with in this country than practically any other sort of crime.

"This is still being investigated, no doubt, but once these investigations are complete, if they have committed criminal offences they should be brought to trial."

When he appears before the Treasury Select Committee, Diamond will be grilled about who at Barclays knew about the Libor fixing and how the issue has been dealt with.

There were reports today that investors are calling for Barclays chairman Marcus Agius to be replaced, by BT and Easyjet chairman Sir Mike Rake.

Agius will also be questioned by MPs on the Treasury Select Committee on Wednesday.

Committee chairman Andrew Tyrie, a Conservative MP, said: "The Libor interest rate benchmark - crucial to transactions right across the economy and affecting millions of people - was systematically rigged over a period of years.

"It appears that many banks were involved and Barclays were the first to own up. This is the most damaging scam I can recall.

"The reputation of Britain's financial services industry has been severely tarnished, albeit unfairly for the overwhelming majority unconnected with the scam.

"The public's trust in banks has been even further eroded. Restoring the reputational damage must begin immediately."

Barclays was fined £290m by UK and US regulators for manipulating the rate at which banks lend to each other in the first of two scandals to rock the City this week.

On Friday, the FSA revealed separately that Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group had agreed to pay compensation to customers who were mis-sold interest-rate hedging products.

Some 28,000 of the products have been sold since 2001 and may have been offered as protection - or to act as a hedge - against a rise in interest rates without the customer fully grasping the downside risks.

Serious Fraud Office investigators are in talks with the regulator over the scandal.

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