Prime Minister David Cameron reveals a full parliamentary committee of inquiry, chaired by Treasury select committee chairman Andrew Tyrie, will be set up in the wake of the Libor scandal.
He told the House of Commons that Barclays’ manipulation of the interest rate had been a “scandal”, but batted away calls for a Leveson-style inquiry into the issues, insisting he wanted to reach the truth quickly.
Chancellor George Osborne said the inquiry would tackle bad practices that had evolved during banking’s “age of irresponsibility”.
He added: “The behaviour of some in the financial services industry has damaged the reputation of an industry that employs hundreds of thousands of people and is vital to the economic prosperity of the country.
“We are changing the failed regulation, reforming the banks – now it’s time to deal with the culture that flourished in the age of irresponsibility and hold those who allowed it to flourish to account.”
It was announced on Monday that Barclays chairman Marcus Agius was resigning over the Libor affair and Channel 4 News has been told that on 27 June, after the Financial Services Authority announced it was fining the bank, staff suspected of wrongdoing were suspended and a number of them may be sacked.
Class actions are also being pursused in the US against Barclays, RBS, Lloyds and HSBC.
Labour leader Ed Miliband told the Commons he would continue pushing for a “full and open” independent inquiry. “I’m not convinced by his way forward because I do not believe it measures up to the scale of what is required,” he said.
The comments follow news that the Serious Fraud Office was considering whether to bring criminal charges.
Now it’s time to deal with the culture that flourished in the age of irresponsibility and hold those who allowed it to flourish to account. Chancellor George Osborne
A statement from the SFO said “the issues are complex” and added it is “considering whether it is both appropriate and possible to bring criminal prosecutions”.
The developments also follow the resignation of the Barclays chairman who will stay in post until a replacement is appointed.
In his resignation statement, Marcus Agius said the Libor revelations show “unacceptable standards of behaviour within the bank” and have dealt a “devastating blow to Barclays’ reputation.”
“As chairman, I am the ultimate guardian of the bank’s reputation. Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside.” he added.
The Bank of England was also drawn into the affair after it emerged staff mistakenly thought they were instructed by the central bank to lie in their rate submissions.
The Financial Services Authority’s report said there had been a misunderstanding arising from a conversation between Bank Deputy Governor Paul Tucker, a favourite for the governor role, and an unidentified senior Barclays manager on 29 October 2008.
Under-pressure Barclays Chief Executive Bob Diamond said Mr Agius’s decision “deserves all of our respect”.
He said: “He has been a thoughtful and supportive colleague to me in all of my roles – especially since I became chief executive last year – and for this I will always be grateful.”
He added: “I welcome the board’s undertaking of an independent, third-party audit of our business practices.
“I am committed to ensuring that the recommendations from this review are implemented in full, as part of a broader programme to continue to build a culture that all of those with a stake in Barclays can be proud of.”
However, pressure is now mounting on Mr Diamond, as regulators and politicians seek ways to reform current banking culture. Both he and Mr Agius are due to be questioned by the Treasury select committee later this week as Labour calls for a wider, “Leveson style” inquiry into banking practices and culture.
Barclays shares surged more than 5 per cent to the top of London’s leading shares index as investors appeared to back Mr Agius’s decision to resign as chairman.
After a volatile start in early trading, the blue-chip stock, which was hammered last week after Barclays was fined, settled around 8.1p higher at 170.8p.
The bank saw around £3bn wiped from its market value last Wednesday after the FSA published its report into the Libor-fixing affair, fuelling fears over the cost of the scandal.