Serious Fraud Office investigators are in talks with the City watchdog over the Barclays rate-rigging scandal that has rocked the banking industry, the Chancellor has said.
George Osborne told MPs the affair was "a shocking indictment of the culture of banks like Barclays in the run-up to the financial crisis".
The Financial Services Authority (FSA), which along with US regulators landed Barclays with a £290 million fine for manipulating the rates at which banks lend to each other, was holding talks with the Serious Fraud Office (SFO), he said.
The Chancellor echoed comments from the Prime Minister that Barclays "had serious questions to answer" as pressure mounted on chief executive Bob Diamond to step down.
Shares in Barclays plummeted 17%, wiping £4 billion off its market value, while taxpayer-backed Royal Bank of Scotland dropped 14% as Mr Osborne said it was among several global banks also being investigated.
Mr Osborne added: "It is clear that what happened at Barclays, and potentially other banks, was completely unacceptable, was systematic of a financial system that elevated greed above all other concerns, and brought our economy to its knees."
Turning to Mr Diamond, who waived his bonus for 2012 in light of the scandal, the Chancellor said: "As far as the chief executive of Barclays is concerned, he has some very serious questions to answer today. What did he know and when did he know it? Who in the Barclays' management was involved and who, therefore, should pay the price?"
Lord Oakeshott, a former Liberal Democrat Treasury spokesman, described the bank as "a casino that was rigging the wheels and loading the dice", adding: "If Bob Diamond had a scintilla of shame, he would resign. If Barclays' board had an inch of backbone between them, they would sack him."
The controversy, which covers a period between 2005 and 2009, could spread to other lenders, as HSBC, UBS and Citigroup are also being investigated. The Chancellor said he would look at strengthening the criminal sanctions available to the financial regulators and added the Financial Services Bill could be amended.
Addressing the scandal in a speech to the Unite union conference in Brighton, opposition leader Ed Miliband called for a criminal investigation. He said: "This cannot be about a slap on the wrist, a forgoing of bonuses, a fine and that's the end of the matter."