The Barclays boss Bob Diamond is facing mounting pressure to resign over his role in the rate-rigging scandal that has hit the banking industry.
David Cameron warned that “the whole management team” at the bank had “serious questions to answer” while Labour demanded criminal prosecutions.
The Chancellor is preparing to make an emergency statement to the Commons on the scandal in which he will promise to change the law if criminal prosecutions are not possible under existing rules.
Mr Diamond waived his annual bonus for 2012 yesterday after the bank was fined £290 million by regulators for manipulating the rates at which banks lend to each other to boost its profits.
Shares in the bank fell eight per cent this morning amid a chorus of outrage from political leaders.
Speaking during a visit to inspect flood damage in West Yorkshire, the Prime Minister was asked whether Mr Diamond, the Barclays chief executive, should resign.
“I think the whole management team have got some serious questions to answer. Let them answer those questions first,” he said. “Who was responsible? Who was going to take responsibility? How are they being held accountable?”
Mr Diamond has said he will waive his multi-million bonus over the scandal.
However, the leader of the Opposition, Ed Miliband, demanded a full-scale criminal inquiry.
Mr Miliband told the Unite union conference in Brighton: “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.”
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 controversy, which was illustrated in a series of emails between traders and Barclays staff, could spread to other lenders, including HSBC (LSE: HSBA.L - news) and taxpayer-backed Royal Bank of Scotland (LSE: RBS.L - news) .
The scandal relates to the London Interbank Offered Rate (Libor), the interest rate that banks pay on money they borrow from one another. The rate is one of the essential pieces of information on which trillions of pounds of financial transactions are based and helps set the interest rates for some mortgages, credit cards and loans.
George Osborne will tell MPs (BSE: MPSLTD.BO - news) this afternoon that the government has been considering an overhaul of how the Libor rate is set. An aide to the Chancellor said he would spell out steps to prevent abuse.
Mr Osborne will also say that he plans to change the law if it is not possible to bring criminal charges against such acts, said the aide, who declined to be identified because the plans are not yet public.
The chancellor will also say that Mr Diamond and his team will have to answer questions over their behavior, the aide added.
Barclays has already dismissed several staff over Libor manipulation and is in the process of firing others linked to the false submissions.
There is no suggestion that Mr Diamond or other executive directors knew what was going on at the bank.
Mr Diamond apologised for the bank’s actions and said he was “sorry that some people acted in a manner not consistent with our culture and values”.
Marcus Agius, chairman of Barclays, said: “The board takes the issues underlying (the) announcement extremely seriously and views them with the utmost regret.
“Since these issues were identified, the authorities acknowledge that Barclays management has co-operated fully with their investigations and taken, and continues to take, prompt and decisive action to correct them.”
Mr Diamond, and three of the bank’s senior managers including finance director Chris Lucas, said they would not take bonuses this year as a result of the regulator’s findings.
However, one major shareholder said the move was insufficient and claimed senior executives should be forced to resign.
“Taking off a couple of million from Bob’s bonus isn’t enough. People should be considering resignations. This has happened under the board’s nose. Where is the accountability?” he said.
Lord Myners, former City minister, told the BBC's Newsnight that any Barclays staff responsible for manipulating the Libor rate should face the prospect of going to prison.
"This is the most corrosive failure of moral behaviour I have seen in a major UK financial institution in my career," he said.
"I think fines and public criticism will not stop these behaviours. These behaviours will not stop until the people perpetrating it or responsible for overseeing them face the prospect of criminal charges and the prospect of going to jail."