Story highlights British prime minister announces investigation into Libor rate-fixing

Probe will call witnesses to give evidence under oath

Follows resignation of Marcus Agius as Barclays chairman Monday

Barclays fined by UK and U.S. regulators for trying to manipulate Libor price

David Cameron, the British prime minister, said on Monday that a full parliamentary inquiry would be held into the Libor rate-fixing scandal and standards in the banking industry, with witnesses called to give evidence under oath.

The joint inquiry by peers and MPs will report by the end of the year and will be led by Andrew Tyrie, the Conservative chairman of the Commons Treasury select committee.

The committee will feed proposals into a parliamentary bill being introduced in January to enact the recommendations of Sir John Vickers, who chaired an earlier inquiry into future models for the regulation of banking.

The Tyrie committee, which is due to grill Barclays chief executive Bob Diamond on Wednesday, will also contribute information into a separate financial services bill aimed at reforming regulation in the City of London, which is due to be enacted before the end of this year.

Mr Cameron said that George Osborne, UK finance minister, would give full details later on Monday of the parliamentary inquiry, which will study standards in the banking industry following the Libor scandal, but he made it clear that it would stop short of being a "Leveson-style", judge-led probe.

Mr Osborne will tell the House of Commons that a full judicial review would be a waste of time and money. Sir Mervyn King, Bank of England governor, and Vince Cable, business secretary, have also rejected that model.

But Mr Osborne is under pressure from the opposition Labour party for some kind of inquiry into standards in the City and his promise of a review of bank conduct may not go far enough to satisfy Ed Miliband, Labour leader.

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"We think there needs to be a full, public, independent inquiry into the practices, governance, professional integrity and regulatory authority for the banking and financial services sector," said a spokesman for Mr Miliband.

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Mr Osborne will also give details of a narrower inquiry into the operation of Libor -- the interbank lending rate used as a basis for market interest rates -- and propose criminal sanctions for those who try to manipulate it.

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The UK Serious Fraud Office confirmed on Monday it was "considering whether it is both appropriate and possible to bring criminal prosecutions" of the Barclays employees who allegedly attempted to manipulate Libor. It will make a decision within a month.

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The US Department of Justice is already conducting a criminal probe but the UK Financial Services Authority, which fined Barclays, decided its criminal powers did not extend to manipulation the rate.

Tracey McDermott, acting enforcement director of the FSA, said Barclays "does not appear to be . . . an isolated case . . . We have a number of ongoing investigations into Libor so you will hear more on this in due course."

Labour was on Monday due to table an amendment to the financial services bill -- currently in the upper House of Lords -- calling for a full public inquiry into the banking industry, which could be put to a vote on Tuesday.

Meanwhile Nick Clegg, deputy prime minister and leader of the Liberal Democrats, has ramped up the pressure on Bob Diamond by indicating he believed the Barclays chief executive should follow the lead of the bank's chairman, Marcus Agius, who confirmed on Monday that he was resigning, stating "the buck stops with me".

Mr Clegg sidestepped calls to demand Mr Diamond's resignation, insisting it was not for politicians to hire and fire bankers, but during a visit to a school in east London he insisted the buck stopped at the top.

"I'm like everybody else in this in that now that the chairman of Barclays has fallen on his sword and has taken responsibility for what has happened, everybody is asking, 'When are the other senior people at the top of Barclays going to take responsibility for the things that happened on their watch?'," said Mr Clegg.

"I don't think it is for politicians to individually hire and fire bankers, but I do think the buck stops at the top.''