Britain's biggest banks are facing the threat of a criminal investigation over the rate-rigging scandal that could cost the industry billions of pounds.
The Treasury has started to look at strengthening criminal sanctions for those responsible for market abuse after Barclays was fined £290 million by UK and US regulators for manipulating the rate at which banks lend to each other.
HSBC and taxpayer-backed Royal Bank of Scotland are among several other lenders 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% - wiping £3 billion from its market value - as investors ditched the stock amid fears the fines could be dwarfed by lawsuits and damages. The banking sector is expected to remain firmly in the spotlight when the Financial Services Authority (FSA) discloses it has found evidence of mis-selling of complex financial products to small businesses.
Chancellor George Osborne told MPs the rate-rigging scandal was "a shocking indictment of the culture of banks like Barclays in the run-up to the financial crisis".
Turning to Mr Diamond, who waived his bonus for 2012 in light of the scandal, the Chancellor said: "As far as the chief executive of Barclays is concerned, he has some very serious questions to answer today. What did he know and when did he know it? Who in the Barclays' management was involved and who, therefore, should pay the price?"
The controversy, which covers a period between 2005 and 2009, could spread to other lenders, as RBS, HSBC, UBS and Citigroup are also being investigated. The penalties, including a record £59.5 million fine from the FSA, followed claims that Barclays manipulated the Libor - London interbank offered rate - and Euribor interbank lending rates.
The rates are set on wholesale money markets - where banks lend to each other - which in turn affects rates they pass on to customers through credit cards, loans and mortgages.
The British Bankers' Association (BBA) launched a review into Libor and how it was set in March. In a statement, the BBA said: "As part of this review we will now be asking the authorities to consider in what manner the Libor-setting mechanism should be regulated in the future." The Chancellor confirmed the Government was already looking at Libor regulation in the context of wider financial services reforms and would consider changing the law so that bank fines go back to the taxpayer.