Image copyright Getty Images

More action to tackle wrongdoing in the financial sector will be unveiled by Chancellor George Osborne on Thursday.

The measures will include making the manipulation of the foreign currency markets by banks a criminal offence.

In a keynote speech he will promise to target "the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them".

There has been increasing concern about whether the multi-trillion pound foreign exchange market was rigged.

In his annual Mansion House speech, Mr Osborne will pledge the extension of legislation used to clean up after the Libor interest rate-fixing scandal.

As well as bringing the forex currency market under this legislation, it will be extended to those who trade in commodities, and also to the fixed income market, where the most common type of products traded are bonds.

'Abuses'

The chancellor is also expected to establish a joint review by the Treasury, Bank of England and the Financial Conduct Authority (FCA) to look into how these markets operate.

Mr Osborne will say: "The integrity of the City matters to the economy of Britain.

"Markets here set the interest rates for people's mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy. I am going to deal with abuses."

A crackdown on malpractice in the financial industry has been gathering pace.

Image copyright Getty Images Image caption George Osborne made his announcement at his annual Mansion House speech

The FCA has stepped up investigations into the sector, and the recent Parliamentary Commission on Banking Standards prompted a new legal regime for executives.

But there has been particular concern recently about the forex market, where traders police themselves.

BBC business editor Kamal Ahmed said: "A new set of storm clouds are gathering over UK banks. The foreign exchange market is under investigation. The allegation is fraud."

'Big fines'

He said: "Companies that operate around the world use the foreign exchange market to buy and sell currencies so that they can trade in different countries.

"Our pension funds also use the market so they can invest globally. If wrongdoing is proved, banks could be facing fines.

We pressed ministers to regulate commodities markets and the full array of financial benchmarks back in 2012, but the chancellor failed to act Cathy Jamieson, Shadow Treasury minister

"The chancellor will say that any manipulation could affect the amount people pay for foreign currencies when they go abroad, as well as the amount companies pay."

It has been reported that at least 15 banks are being investigated by regulators around the world for alleged forex manipulation.

Martin Wheatley, the head of the FCA, said recently that the allegations, if substantiated, could be "every bit as bad as Libor".

The Libor revelations involved the fixing of the interest rates at which banks lend to each other. Banks around the world have so far been forced to pay fines totalling more than $6bn.

Also in his speech, Mr Osborne is expected to rule out the UK opting in to European Union rules on market abuse, which are due to come into force in 2016.

The Treasury argues that the UK's own regulations retain the flexibility needed to protect London's role as a global financial sector.

Labour's shadow Treasury minister Cathy Jamieson said the chancellor's review was "too little, too late".

She said: "We pressed ministers to regulate commodities markets and the full array of financial benchmarks back in 2012, but the chancellor failed to act."