Banks face criminal rate fix probe

Britain's biggest banks are embroiled in a criminal investigation after the Serious Fraud Office (SFO) opened an official inquiry into the rate-rigging affair.

At the end of an explosive week of high-profile scalpings and fierce political debate, SFO director David Green QC formally set his department's sights on the banking scandal.

The move comes after Barclays was fined £290 million 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 ultimately 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 (FSA) 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 this investigation out to the full."

Barclays shares continued to suffer, falling 2% on the FTSE 100 Index, despite some brokers urging investors to buy into the stock's relatively cheap price tag.

The SFO revealed earlier this week that it had been working closely with the FSA during its investigation and was weighing up whether 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 independent inquiry into the banking scandal despite MPs rejecting the demands. Mr Miliband said that while the party would co-operate with a parliamentary investigation, its remit was too "narrow" and a judge-led probe was still needed.

Bank of England deputy governor Paul Tucker and Barclays chairman Marcus Agius, who announced his intention to resign after a replacement for Mr Diamond is found, will give evidence on the rate-rigging scandal to the Treasury Select Committee next week.