london 07 01, 2012, 09:40 IST
The British government ordered an independent review into the workings of key lending rates between banks, after Barclays was found guilty of rigging them, and summoned the bank's boss to answer questions about the scandal.
U.S. and British authorities fined Barclays $450 million for manipulating the London Interbank Offer Rate (Libor), the interest rate on loans that banks make to each other. Barclays was the first to settle in an investigation that is expected to name others and reaches across Europe, Japan and North America.
The scandal has fuelled public outrage at the culture and practices of the banking industry and prompted calls from lawmakers across the political spectrum for an inquiry.
The British government plans a short, urgent review that would allow it to amend the Financial Services Bill currently going through parliament, a spokeswoman for the Prime Minister said. The review will examine Libor and the possibility of criminal sanctions.
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"The person leading the review will want to talk to those involved, the Bank of England, the FSA (Financial Services Authority) and people who use Libor," Mark Hoban, financial secretary to the Treasury, told BBC television.
Prime Minister David Cameron, asked about a full public inquiry, told BBC television: "Let's take our time, think this through carefully...Let's get this right."
A public inquiry would be a risky step for a government already under fire over a string of embarrassing revelations in a year of public hearings following 2011's phone-hacking scandal.
The chief executive of Barclays, Bob Diamond, has been summoned to appear before British lawmakers on Wednesday July 4 to answer questions about the scandal.
On his last appearance before a parliamentary committee last year Diamond said it was time for bankers to stop apologising. He is now under intense pressure to quit Barclays, where he ran the investment banking arm Barclays Capital when the interest rate rigging occurred in 2005-2009.
"Parliament and the public need to know what went wrong and whether the perpetrators have been rooted out," said Andrew Tyrie, head of Parliament's Treasury Select Committee, which will be questioning Diamond.
"We also need to be given confidence that this has been put right."
Other banks being investigated in the global probe include Citigroup , HSBC and UBS . No criminal charges have been filed but Britain has called in the fraud squad to investigate possible crimes.
Bank of England Governor Mervyn King launched an angry attack on British banking culture on Friday, saying something had gone very wrong with an industry which he derided for resorting to "deceitful" methods to make money.
The country's most powerful monetary official, he said a fundamental overhaul was needed for a sector that is reeling from a string of financial scandals.
Britain's banking industry, one of the largest cogs in Britain's economy and important for tax revenue, has been knocked by a series of damaging headlines.
In the same week as the Libor scandal erupted, Britain's Financial Services Authority said it had settled with four banks - Barclays, RBS, HSBC and Lloyds - after finding evidence they mis-sold products to protect small businesses against a rise in interest rates.
Justice Secretary Ken Clarke said that if any of the ongoing investigations revealed suspected criminal offences "they should be brought to trial".
"We are very bad at prosecuting financial crime in this country," he told BBC radio on Saturday.
"That is why when we're setting up the National Crime Agency we should look at the record of the Serious Fraud Office. I suspect financial crime is easier to get away with in this country than practically any other sort of crime."
(Editing by Sophie Walker)