The UK's biggest banks are embroiled in a criminal investigation after the Serious Fraud Office opened an official inquiry into the rate-rigging affair.
At the end of an explosive week of high-profile scalpings and fierce political debate, Serious Fraud Office (SFO) director David Green QC formally set his department's sights on the banking scandal.
The move comes after Barclays was fined £290m by US and UK regulators for manipulating the Libor, the key lending rate which affects mortgages and loans.
The claims ultimately led to the resignation of Barclays boss Bob Diamond and have become the focal point of a bitter row in Westminster over ethics in the banking sector.
The Treasury welcomed the SFO's decision, which could lead to criminal prosecutions, and said the department will have “the resources they need for the investigation”.
Treasury Chief Secretary Danny Alexander told Sky News: “The Financial Services Authority has carried out a detailed investigation and the Serious Fraud Office has the opportunity to take forward the investigation... of course, as a Government we will make sure they have all the resources they need to carry out this investigation.”
Barclays shares continued to suffer, falling 2% on the FTSE 100, despite some brokers urging investors to buy into the stock's cheap price tag. The SFO revealed earlier this week that it had been working closely with the Financial Services Authority (FSA) during its investigation and was weighing up if it could proceed with criminal prosecutions.
The Government department, which is responsible for investigating and prosecuting serious and complex fraud, will cover the entire banking sector and warned assessing the evidence would take time.
As the SFO unveiled its investigation, Labour leader Ed Miliband continued to push for an inquiry into the scandal, despite MPs rejecting the demands. The Labour leader said that while the party would co-operate with a Parliamentary investigation, its remit was too “narrow”.
Mr Miliband also defended the conduct of Ed Balls after the shadow Chancellor engaged in a bitter war of words with his opposite number George Osborne in the Commons.
It followed an interview with the Spectator where Mr Osborne said former Prime Minister Gordon Brown's inner circle had “questions to answer” over apparent pressure on Barclays to post lower Libor rates during the credit crunch.
Bank of England deputy governor Paul Tucker and Barclays chairman Marcus Agius, who announced his intention to quit after a replacement for Mr Diamond is found, will give evidence on the scandal to the Select Committee next week.
Mr Tucker was dragged into the affair by Mr Diamond, who revealed a record of a conversation they had in October 2008 in which the deputy governor relayed concerns in Whitehall about Barclays' high Libor rates.