Banks face massive bill as crime cases hang over rate-rig scandal

The Treasury has launched a review to examine strengthening criminal sanctions for those responsible for market abuse after Barclays was fined £290m by UK and United States regulators for manipulating the rate at which banks lend to each other.

HSBC and the taxpayer-backed Royal Bank of Scotland are among several other lenders which are being investigated by the City watchdog for fixing the interbank lending figures that affect millions of homeowners and small firms.

Serious Fraud Office investigators are in talks with the Financial Services Authority (FSA) over the scandal, while pressure is mounting on Barclays chief executive Bob Diamond to stand down.

Barclays saw shares slide 15 per cent – wiping £3bn from its market value yesterday – as investors ditched the stock amid fears the fines could be dwarfed by lawsuits and damages.

Prime Minister David Cameron said the Barclays management team had some “big questions” to answer. “In terms of what happens next, I would say that the regulator should use all the powers and means at their disposal to pursue this in the way they feel is appropriate,” he added.

Lord Oakeshott, a former Liberal Democrat Treasury spokesman, described the bank as “a casino that was rigging the wheels and loading the dice”.

“If Bob Diamond had a scintilla of shame, he would resign,” he said. “If Barclays’ board had an inch of backbone between them, they would sack him.”

The banking sector is expected to remain firmly in the spotlight today when the FSA discloses it has found evidence of mis-selling of complex financial products call interest rate swaps to small businesses.