Miliband Osborne Cameron Balls
George Osborne, David Cameron, Ed Miliband, and Ed Balls have all spoken out against the banking industry and the need for reform (Parliament TV/IBT UK)

Bankers and the financial services industry are enduring a period of ridicule, rage, and reform as they again come under the political spotlight following the Libor rate-fixing scandal that has engulfed Barclays and looks set to consume other big British banks.

Politicians on all sides of the House of Commons have criticised the banking business, as they prepare for the start of a parliamentary inquiry into the industry, with Labour leader Ed Miliband becoming the latest to outline his views on how this crisis in confidence among the public towards financiers can be resolved.

"We need a banking system where bankers are not given an incentive to focus on the short-term return, but to build a long-term, trusted relationship with their customer," Miliband said in a speech at the London headquarters of the Co-operative Bank.

"There are those who say that casino-style high risks and high rewards are an intrinsic part of what keeps the City of London globally competitive.

"Of course the City must be competitive, but we must make sure the rest of the country prospers too.

"That means we need a banking system which serves every region, every sector, every business, and every family in this country, with rules that should not just work for one Square Mile, in the City of London, but work for the other 94,000 other square miles of this country as well."

Miliband added: "We want banks to serve the country, not a country that serves its banks."

Parliamentary banking inquiry and Libor scandal

Under the parliamentary inquiry into banking, chaired by Tory MP and chairman of the Treasury Select Committee Andrew Tyrie, Chancellor George Osborne said the "transparency, conflicts of interest, culture and professional standards within the industry" will be probed.

This was catalysed by the Libor rate-fixing scandal at Barclays, unearthed in an investigation by regulators the Financial Services Authority (FSA).

Libor, or the London Interbank Offered Rate, is a central interest rate calculated from the interest rates at which banks are able to borrow from one another. This can then be used as an anchor rate for products such as mortgages and corporate loans.

Submitters at each bank report their rates each day.

A few Barclays traders and submitters were found to be mis-reporting rates to lower than reality in an attempt to improve the bank's trading positions.

Barclays was slapped with a £59.5m fine by the FSA - the City of London's biggest ever.

The FSA is already investigating other big UK banks and it is widely expected that more fines will be dished out for similar wrongdoing across the finance industry.

It is also thought that Barclays' behaviour was not the worst.

"The behaviour of some in the financial services industry has damaged the reputation of an industry that employs hundreds of thousands of people and is vital to the success of our economy," Osborne told the House of Commons when announcing the inquiry.

"This is not just about assuaging public anger. It is also about restoring any damage that has been done to the reputation of the City of London and ensuring that London remains the pre-eminent financial centre in the world."

Ed Miliband's banking reforms

Miliband called for the big banks to be broken up to improve competition, by forcing the dominant big five to sell off thousands of their branches.

More transparency into the regional breakdown of lending statistics, to see what parts of the country were being deprived of access to credit, is also needed, Miliband said.

Furthermore the government must fully adopt the Vickers report into banking reform, which calls for a complete separation of the retail and investment sides within banks, in order to protect consumers from any losses stemming from riskier "casino" parts.

He also advocated the creation of a British Investment Bank for direct lending from government to small businesses.

Miliband said he wants the term banker to return to "being a compliment rather than a term of abuse".

Ed Balls and Vince Cable on Marr

Ahead of Miliband's speech on banking reform Ed Balls, shadow chancellor, appeared on the BBC's Andrew Marr Show.

"The reason why people are so angry is they think when people avoid their taxes or cheat on benefits they get sentences in jail," Balls said.

"But when bankers do massive multi-million or billion pound frauds, there aren't criminal prosecutions."

Balls said that the industry needs "root and branch reform" and that the government is "foot-dragging on the floor" in implementing changes to the system.

The government's Finance Bill is due to reach parliament for debate in January.

It includes parts of the Vickers report, such as splitting some of the retail and investment parts of banking, but does not fully take on the recommended reforms.

Prime Minister David Cameron said he wants the parliamentary inquiry to wrap up and reach its conclusions before the Finance Bill reaches parliament, so recommendations on banking reform can be incorporated to the legislation.

"The British people want to see two things: they want to see bankers who acted improperly punished; and they want to know we will learn the broader lessons of what happened in this particular scandal," Cameron told MPs.

Vince Cable, the government's business secretary, appeared alongside Balls on the Andrew Marr Show and blamed banks for holding back the UK's economic recovery.

"The real problem at the moment is that the banks - because of their existing culture, which is frankly anti-business, obsession with short-term trading profits, not focusing on the long term - are throttling the recovery of British industry," he said.

Cable blamed banks for not offering enough credit to businesses up and down the country.

"There has been a breakdown in the mechanism, in the transmission. It just doesn't get through to companies," he said.

"We are going to ensure that the new money that the chancellor and the governor of the Bank of England talked about at the Mansion House does actually directly reach the companies.

"Given that our leading banks are, frankly, throttling recovery by not making business lending available, particularly to small-scale companies, we now have to focus single mindedly on that task."

At his annual Mansion House speech, Mervyn King, governor of the Bank of England, outlined two Treasury-backed credit easing schemes to increase the amount banks are lending into the wider economy.

The two schemes - called "funding for lending" and Extended Collateral Term Repo - will see billions made available to banks in the form of cheap loans.

This, claims King, will offer a significant financial incentive for banks to lend at an affordable rate as their access to the cheap loans will be directly linked to how much affordable finance they free up for consumers and businesses.