Ed Miliband is to call for a "root and branch" reform of the banking industry, including forcing the "big five" banks to sell up to 1,000 more branches to increase competition.

The Labour leader will deliver his blueprint for change on the day the Bank of England deputy governor, Paul Tucker, faces questions from MPs on the Treasury select committee over discussions he had with Barclays on the key interbank lending rate known as the Libor.

Miliband will seize on the Libor rate-fixing scandal as vindication of his much-criticised attack last year on "predatory" capitalism and promise wide-ranging action to create a "different kind of economy", starting with the banks.

Measures include tackling the bonus culture amid speculation that the former Barclays chief Bob Diamond is potentially in line for a multimillion-pound payoff.

The Labour leader will say in a speech at the London headquarters of the Co-operative Bank that breaking the dominance of the five main high-street banks is among the crucial first steps needed to move from "the casino banking we have to the stewardship banking we need".

He will say the big five should be forced to sell up to 400 branches. With Lloyds in the process of selling 650 branches to the Co-operative Bank, this would bring the total to around 1,000. The move would allow two new "challenger banks", run by the private sector, to offer more choice and lower charges.

He will also back EU proposals – opposed by the chancellor, George Osborne – to set a maximum 1:1 ratio of bonus to pay. Other measures should include a tough code of conduct for the industry overseen by a regulatory body modelled on the British Medical Association, and the setting up of a financial crime unit within the Serious Fraud Office "so that our country is no longer a soft touch for white collar crime".

Miliband will also publish a report on Labour's case for a British Investment Bank to help the business sector, which is "having to compete with one hand tied behind its back" because of the lack of available credit.

The Labour leader will say on Monday: "The revelations of the last two weeks have shown precisely what has gone wrong with our economy in the last decades, and the test of whether we can change things now starts with our banks.

"Last September I said to the Labour party conference that Britain needed a different kind of economy. An economy based not on the short-term, fast buck, take-what-you-can culture we see too much of in our banks today. But on long-termism, patient investment, and responsibility shared by all.

"Today I am going to tell you what a better banking system would look like. I will describe the first steps towards moving from the casino banking we have to the stewardship banking we need.

"It will mean root-and-branch change for our banks if we are to deliver real change for Britain, if we are to rebuild our economy so it works for working people, and if we are to restore trust in a sector of our economy worth billions of pounds and hundreds of thousands of jobs to our country."

The Treasury committee will grill the Bank of England deputy governor on Monday afternoon over discussions he had with Barclays on Libor after the bank was fined £290m by UK and US regulators for manipulating the lending rate, which affects mortgages and loans.

Tucker, a frontrunner for the position of bank governor when Sir Mervyn King steps down, found himself in the spotlight after the former Barclays chief revealed a note of a phone call between the two men, in which the deputy governor appeared to encourage the bank to submit lower Libor submissions in light of concerns from senior Whitehall figures.

As Miliband prepared to deliver his speech, whose contents were trailed over the weekend in an interview with the Mail on Sunday, Boris Johnson, the Conservative mayor of London, rounded on politicians who are "slagging off" a sector that is "crucial to the British economy".

Johnson, who has steadfastly refused to criticise Diamond, briefly one of his mayoral appointees, took up his familiar position as the defender of the banking industry as he backed the "imaginative people who are willing to take risks". He used his Daily Telegraph column to challenge the prevailing wind in the wake of the Libor rate-rigging scandal by warning against regulating banks to "the point that they are too nervous to lend" or getting rid of "casino" investment banking to focus instead on "good old high-street stuff".

"You need the high rollers as well as the nice chaps who used to give you sherry," he wrote.

Johnson suggested a phone app called "Fixme, the way of fixing Libor with no incriminating emails".

He wrote: "It is time for British politicians to say it loud and clear and in unison: we need bankers my friends. We need bankers who are willing to take punts and put their necks on the line. Yes, by all means arrest anyone who has been involved in a criminal conspiracy to fix Libor.

"Bang 'em up. Slam 'em away. But we need the political establishment in this country to stop slagging off a sector that is utterly crucial to the British economy and the current system of global capitalism – and after four years of navel gazing since the crash, we have yet to come up with an alternative."