Media playback is unsupported on your device Media caption David Cameron said he would not be pushed into making a snap decision about whether to order a full inquiry into the banking industry

An independent review of the workings of the Libor inter-bank lending rate has been announced by the government in the wake of the Barclays fine.

Barclays was fined £290m ($450m) for attempting to manipulate the Libor, and other banks are being investigated.

Barclays boss Bob Diamond has been summoned to appear before the Treasury Select Committee on Wednesday.

Labour leader Ed Miliband has called for a public inquiry into the customs and practices of the banking industry.

Earlier this week, the Financial Services Authority and US Department of Justice fined Barclays, and investigations are under way into HSBC, RBS, Citigroup and UBS.

The independent review, which will examine the future operation of Libor - the daily rate set by the British Bankers' Association (BBA) - will be established next week and report by the end of summer.

It will ensure amendments can be made to the Financial Services Bill which is currently going through Parliament. It will also examine whether to target institutions or individuals and whether to launch criminal prosecutions rather than impose fines.

Andrew Tyrie, the select committee chairman, said Mr Diamond's hearing would focus on the Libor scandal, which he described as "the most damaging I can recall".

"The public's trust in banks has been even further eroded. Restoring the reputational damage must begin immediately," Mr Tyrie added.

Barclays' chairman, Marcus Agius, will appear on Thursday.

'Corrupt elite'

Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: AAA-rating AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule.

Treasury minister Mark Hoban said: "What the public wants to see is a government that's prepared to take action to resolve these problems and get on with it as a matter of urgency."

Ministers are also considering a review into bankers' professional standards.

They have said new regulation is already in the pipeline with measures including the separation of bank investment and retail arms and a new regulatory structure.

During a speech to the left-leaning think tank the Fabian Society, Mr Miliband said the government needed to do more.

"The British people will not tolerate anything less than a full, open and independent inquiry, they will not tolerate the establishment closing ranks and saying we don't need an inquiry.

"They want a light shone into every part of the banking industry - including its dark corners. They want a banking system that works for them.

Analysis Driven by a week of public anger at the banking system, the announcement of an independent review is acknowledgement of the need to call those responsible to account. It's not yet clear who will lead the review of how banks were able to fiddle their own lending rates but it will be independent, and will report before the end of summer, with the possibility of new criminal sanctions either for individuals or institutions. That falls short of the Leveson-style inquiry demanded by Labour but is an advance on what the chancellor pledged in his initial reaction to the Barclays fine. While the governor of the Bank of England insists the job in hand should be starting the process of reform rather than costly and lengthy enquiries, it is clear the political agenda is being driven by the public appetite for a day of reckoning for Britain's banking industry.

"They want people held to account, they do not want sticking plaster solutions and I'm afraid at the moment that is all the government is offering."

Mr Miliband also said new powers were required to prosecute people who "do the wrong thing in banking".

"Not one person has gone to jail for what happened during the financial crisis. Why is it that when you shoplift £50-worth of goods you go straight to jail but when you fiddle, lie and cheat your way through the system, gaining millions of pounds, you get away with a slap on the wrist - if that."

The TUC and some Tory backbenchers have also called for a probe similar to the Leveson Inquiry, which is looking into the practices and ethics of the press, but the Treasury and the Bank of England have rejected the idea.

Bank of England Governor Sir Mervyn King said Britain's banks needed a "real change in culture" but ruled out a wider inquiry.

Prime Minister David Cameron said the government would not rush a decision on whether to hold an inquiry and would consider the issues "very carefully".

"It's very important... the government takes all the actions necessary - holding bankers accountable, making sure they pay their taxes, making sure there's proper transparency, making sure the criminal law can go wherever it needs to, to uncover wrongdoing. All of those things need to happen," he said.