Pressure was growing yesterday for the bankers involved in interest-rate fixing to face criminal charges.
The Chancellor, George Osborne, appeared to rule out prosecutions of individual bankers last week, telling Parliament that the power of the Financial Services Authority (FSA) "does not extend to being able to impose criminal sanctions for manipulation of Libor".
But with public anger mounting at City misconduct, senior Westminster figures yesterday urged the authorities to reinvestigate whether any criminal offence had been committed.
The Business Secretary, Vince Cable, warned that public opinion would expect the bankers to be prosecuted if there was any evidence of criminal activity, because of the vast sums involved. He told Sky News: "They just can't understand why people are thrown into jail for petty theft and these guys just walk away having perpetrated what looks like a conspiracy."
Chuka Umunna, the shadow Business Secretary, said: "It is wrong that a young person shoplifting an item worth £20 can feel the full force of the law but those manipulating the system for millions of pounds seem to get away with it. Criminal law needs to apply equally well to those as well."
The former head of the Metropolitan Police, Ian Blair, said that even an inexperienced police constable could see that "this is a conspiracy to defraud: it can be nothing else."
Their remarks will increase calls for the Serious Fraud Office and the Director of Public Prosecutions to be involved in a matter that so far has been treated as an issue between the banks and the regulators.
Adair Turner, chairman of the Financial Services Authority, told BBC1's Andrew Marr that people were "justifiably angry" about some banking practices. But he added: "The situation on the law is that we have looked very carefully at what types of cases we are able to bring, and in this particular case of Libor, because it is not a qualifying instrument under the Act, it is not covered by the criminal law. We have therefore brought the maximum cases we can bring under our own powers for breaches of our principles."
A survey by the consumers' organisation Which? found that 78 per cent of respondents believed the banks had broken the law and wanted to see individuals prosecuted.
Q&A: Cameron's Libor inquiry
Who will head the inquiry?
The Government has not yet said who the chairman will be, but have said that it will be "an independent expert", which would appear to rule out any presently running a bank or working for the FSA.
When will the inquiry begin?
It starts this week.
Is this a "Leveson Inquiry" into banking?
Some people would like to see bankers subjected to the sort of questioning that executives of the Murdoch media empire underwent but this inquiry will be strictly about the fixing of the Libor.
Why such a narrow remit?
The Government says they know what the problem is and it needs fixing quickly. They want the inquiry to report in the autumn, so that changes can be brought in next year.
Is it the only inquiry into banking?
This week, the Commons treasury committee will cross examine the head of Barclays, Bob Diamond, and others. The British Bankers' Association has a separate review, due to report at the end of July.
What might the inquiry recommend?
The inquiry will almost certainly look at making interest fixing a criminal offence.
But will it say anything about 'banking' culture?
Ed Miliband has said the inquiry should look at "culture and ethics" as well as regulation, but whether it does may depend on who is in charge.