LONDON: Britain yesterday said it had brought in the fraud squad to investigate possible crimes and would tighten laws over attempts to manipulate lending rates, a scandal which has engulfed Barclays and is expected to spread to other banks.

Shares in Barclays tumbled by as much as 18 per cent at one point, wiping out £4.2 billion (BD2.16bn) from its share price - the biggest one-day fall since 2009.

The bank agreed to pay a record $453 million fine to US and British regulators for attempting to manipulate the London interbank offered rate (Libor) in 2005-08. It is the first bank to settle in a case that also includes most of the world's other largest financial institutions.

"This is a scandal, it's extremely serious. They've paid a very large fine and quite rightly but frankly the Barclays management team have some big questions to answer," Prime Minister David Cameron said. He and Finance Secretary George Osborne both said regulations would be reviewed and tightened if necessary.

Barclays chief executive Bob Diamond has acknowledged that the settlement would damage customer trust in the bank, and said he and other senior executives would forgo bonuses this year. Politicians, including some from Cameron's Liberal Democrat coalition partners, say Diamond should resign.

The Libor, compiled from rates that banks pay each other for loans, is used throughout the financial system to set loan rates around the world. The investigation - which disclosed e-mails in which bankers appeared to promise bottles of champagne to thank each other for help in setting the rates - has added to a storm of anger against the financial industry.

Osborne said the e-mail exchanges "read like an epitaph to an age of irresponsibility".