The Prime Minister, David Cameron has announced that an inquiry will take place into the banking sector.
The inquiry will take the form of a parliamentary review led by the chairman of the Treasury select Committee (TSC), Andrew Tyrie MP. The committee will have access to both documents and ministers from this and the last government.
The review falls short of the full independent inquiry demanded by the Labour leader, Ed Miliband.
The review will take place following the Libor rate-rigging scandal that saw Barclays fined a total of £290m and implicates other banks and the uncovering of a mis-selling scandal over interest swap rates to small businesses and follows on from the payment protection insurance mis-selling scandal.
The review will be separate from a further inquiry into the Libor market which was also announced today by the Chancellor, George Osborne, which will investigate conflicts of interest and the culture surrounding the Libor market. It promises to publish its conclusions by the end of the year.
Announcing the review in parliament, David Cameron said: "This committee will be able to take evidence under oath, it will have full access to papers and officials and ministers including ministers and special advisers from the last government.
"Bankers who have acted improperly should be punished," and it was important to learn the lessons of the affair.”
Labour leader Ed Miliband said the review should be undertaken independently of bankers and politicians to ensure the public believes in the authenticity of the inquiry.
He said: "I'm not convinced by his way forward because I do not believe it measures up to the scale of what is required.”
Mr Osborne also announced today that fines such as the £290 million imposed on Barclays will go direct to the Treasury and the taxpayer rather than being paid to other banks via the FSA.
The Libor scandal has already claimed the scalp of Barclays Chairman Marcus Agius, but Bob Diamond still remains in his post as chief executive. Barclays say he has the backing of shareholders and he faces a vital appearance before the TSC on Wednesday.
Mr Miliband reiterated his call for Mr Diamond to resign, saying that Mr Diamond was not the man to restore trust in British banks.
Barclays has announced that it will undertake its own internal review into the Libor affair.
Meanwhile, the Serious Fraud Office said it was working with the FSA to establish whether it is possible and appropriate to bring criminal prosecutions against traders implicated in the Libor scandal.