Bob Diamond, Barclays chief executive faces calls for his resignation as shares in the bank plummeted by 8% after it was handed a £290million fine for its part in the falsification of interest rates.
Pressure intensified on the under-fire boss as it appears Labour leader Ed Miliband announced he will call for criminal proceedings into the outrage.
Mr Diamond has decided to forfeit his bonus following the scandal, which Barclays and other banks fixed critical interest rates to conceal the magnitude of their bad debts.
However weight is growing on him to vacate his post, and the price of Barclays shares dropped spectacularly at the likelihood of further uncertainty at Britain's third-largest bank.
It follows the divulgence of disturbing emails which show how bonus-hungry traders promised bottles of expensive Bollinger champagne to each other to fabricate the figures that affect millions of homeowners and small companies.
Other banks were also embroiled in the investigation, with Lloyds, HSBC and Royal Bank of Scotland admitting they were also under scrutiny.
It is surmised that Barclays provided the watchdog with vital information,with the US Department of Justice speaking of its 'extraordinary co-operation',which helped to save it from a criminal prosecution.
But,talking to the union Unite, Mr Miliband commented:'This cannot be about a slap on the wrist.
'When ordinary people break the law, they face charges, prosecution and punishment. The same should happen here.
'The public who are paying the price for bankers' irresponsibility will expect nothing less.'
The malpractices occurred in Barclays Capital, the bank's investment banking arm,which was managed at the time by Mr Diamond.
Lib Dem peer Lord Oakeshott,said: ‘The whole City knew Barclays Capital under Bob Diamond was a casino, but not that they were rigging the wheels and loading the dice.
‘This does terrible damage to Barclays’ own reputation, the integrity of the City of London and many people’s waning trust in capitalism and free markets.
'If he had a scintilla of shame,he would resign.If Barclays' board had an inch of backbone between them,they would sack him.'
When David Cameron was questioned whether Barclays chief executive Bob Diamond should resign or not,he said 'I think the whole management team have got some serious questions to answer.Let them answer those questions first.'
The scheme involved interest rates on the extensive money markets,where banks lend to each other.
It transpired traders plotted to set artificially low rates to hoodwink the markets into assuming the banks were in a healthy financial shape in the run-up to the credit crunch.
Manipulating the figures also allowed bankers to make money by placing bets on the way the rates would move.
The wholesale rates concerns homeowners because they control how much they pay on variable rate loans and mortgages.
Sir Martin Taylor,who managed the bank from 1993 until 1998,told BBC Radio 4’s Today programme: 'The question of how high up knowledge of this goes is something only Barclays can answer.I think they should answer.'
These organisations are very large, as I know myself, and the chief executive doesn’t always know everything that’s happening in the organisation, though he’s responsible for setting the tone of the organisation.
'But somebody at senior level somewhere will certainly have known.I can’t believe Barclays haven’t identified who that is.
'They’ve been investigating for years, so have the FSA, and no doubt they will take appropriate action.
'It’s really for the board to decide whether Bob Diamond, who has amazing leadership qualities and huge personal following in the organisation,can be the person to turn the page on this, or whether he’s part of the problem.'
Boris Johnson said the attempted manipulation was a 'very,very dodgy practice indeed' and insisted all banks should 'come clean'.
Also quizzed on if Mr Diamond should quit,he replied: 'It's not for me to say who is culpable in this but plainly banks have been forthcoming in getting their dirty linen out there.
I think that the whole banking industry now needs to come clean on what's been going on.'
Johnson added: 'I think that if there has been criminal activities then clearly people need to pay the price and I think to manipulate interest rates for gain looks to me like a very,very dodgy practice indeed.'
The former chairman and chief executive of Royal Bank of Scotland,Sir George Mathewson, said: 'If senior management knew (what) was going on, then they deserve all that they're going to get because that is unacceptable.'
On Mr Diamond’s calls of resignation,he said: 'I wouldn't make as quick a judgement as that.I think that possibility should exist.
'I think that his case is interesting in as much he’s really the first chief executive of a UK bank to command the sorts of rewards he’s receiving and,as such, there should be a very high expectation of him.'
Treasury Committee member Pat McFadden said: 'You really have to wonder. Bob Diamond says this was counter to the values of the bank - you’ve got to wonder what the values really are in the bank, if this was the behaviour at quite senior levels of its investment banking division.
'The board of Barclays,if they are sitting this morning, thinking, "we’ve paid the fine, we’ve co-operated with the inquiry, that’s the end of it", I think that would be a real mistake.
'I don’t think they should underestimate the damage this has done to their reputation and probably to banking more generally.'
The scandal adds to the scrutiny on an industry already tainted by public outrage at highly extravagant bonuses,mis-selling scandals and the RBS computer glitch chaos at the weekend.
In one of the emails that were found,a trader at a different bank wrote to ‘Trader G’ at Barclays: ‘Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger.’
More emails disclosed how they would yell across the desk at each other to plead for the interest rate to be set at a certain level in the dream of making vast profits for themselves,running into the millions.
Another said: ‘Coffees will be coming your way either way, just to say thank you for your help in the past few weeks.’
His colleague replied: ‘Done...for you big boy.’
The astonishing 44-page report,published by the Financial Services Authority, uncovered the cold blooded tactics used by traders to try to influence the wholesale rates – known as the London Interbank Rate (Libor) and the European Interbank Rate (Euribor).
They hoped to keep the rates artificially low as a high Libor rate implies a bank is not as strong as other banks as it is being charged a higher rate of interest to borrow money.
It is believed that between ten and 20 rogue dealers were entangled in the web of deceit, all have since been dismissed or facing the axe.
Commons Treasury committee member, Andrew Tyrie, said Mr Diamond would be beckoned to account for what had happened.
‘This is appalling. It just beggars belief that this sort of attitude should have been so widespread’
‘The crucial thing now is to make sure that it is being cleared up. That is why we will be calling in Bob Diamond to make sure that what’s required had been done in Barclays to improve the culture.
‘Banks were clearly acting in concert.I fear it’s not going to be the end of the story,that we are going to find that other banks have been involved.’
But Labour’s financial spokesman Chris Leslie said the situation was so serious it may have to go ‘beyond the regulators and into a criminal investigation’.
It tops a particularly embarrassing time for Barclays,whose notorious chief executive was once labelled ‘the unacceptable face of banking’.
Last year,his pay package was worth around £18million.In January 2011,it was found guilty of luring elderly customers to bet their life savings on the stock market.
An estimated 12,000 faithful customers lost half their savings.
Some lost more than £110,000 and in February this year, it was found guilty of a ruthless tax avoidance scheme to rob taxpayers of around £500million.
In April, its cost for the remuneration to victims of the mis-selling of payment protection insurance (PPI) soared by £300million to £1.3billion.
The FSA has said it fined Barclays £59.5million, the biggest fine that it has ever handed out in its history.
The rest of the £290million was imposed by American authorities.
Acting director of enforcement and financial crime at the FSA,Tracey McDermott, said: ‘Barclays’ misconduct was serious, widespread and extended over a number of years.’
She condemned the bank’s treacherous actions, which began in 2005 and carried on until 2010, as ‘wholly unacceptable’.
During the credit crunch in 2007,the FSA said corporate managers at Barclays put pressure on the submitters to log low Libor rates to make the bank look stronger than it was.
The crunch began in August 2007 and from September, the FSA said: ‘Barclays determined its Libor submissions whilst taking senior management’s concerns about negative media comment into account.’
One submitter said in an email that the bank would attempt to file the same Libor rates as other banks ‘or else the rumours will start flying about Barclays needing money because its Libors are so high’.
Labour MP George Mudie, of the Treasury Select Committee, said: ‘It is a major scandal and it is a scandal that affects the integrity of the financial system.’
Barclays chairman Marcus Agius said: ‘The board takes the issues underlying the announcement extremely seriously and views them with the utmost regret.’