The chairman of the UK's Financial Services Authority yesterday condemned the “huge blow” inflicted on the reputation of the London banking industry by people who have manipulated inter-bank interest rates, in a speech coming shortly after Barclays’ chief executive and chief operating officer quit amid the scandal.

Adair Turner said that the old perception that the FSA was “not an enforcement-led regulator” has changed, and the shift has been clearly demonstrated by the tough action it took against Barclays over LIBOR manipulation. Barclays has incurred penalties from US and UK authorities totalling £290 million (around $455 million) for misconduct relating to the inter-bank interest rate market.

Turner commented on the same day that Bob Diamond resigned as chief executive of Barclays, shortly followed by the resignation of the UK-listed bank’s chief operating officer, Jerry del Missier. Both men resigned with immediate effect. It is understood that the FSA is investigating a number of other financial institutions for allegedly rigging LIBOR rates that are the basis for many financial products used around the world. Diamond is due to give evidence to the UK’s House of Commons Treasury Select Committee today; media reports have focused on communications that Diamond is said to have had with the Bank of England about the interest rate market.

Turner, in his speech to the FSA’s annual meeting, highlighted the shift in how the regulator oversees financial markets, explaining changes since the financial crisis broke in 2008. He was scathing about the LIBOR scandal.

“The LIBOR scandal has caused a huge blow to the reputation of the banking industry. The cynical greed of traders asking their colleagues to falsify their LIBOR submissions so that they could make bigger profits has justifiably shocked and angered people, in particular when we are facing hard economic times provoked by the financial crisis,” Turner said.

“Further investigations relating to LIBOR are ongoing; and investigations of this type require very significant resources and take several years to launch, develop and bring to conclusion. The successful completion of one aspect of the case last week therefore reflects approaches and resources put in place and built up over the last several years,” Turner said.

He continued: “Too much of what is described in the investment banking world as 'creative' or 'innovative' , is not creative or innovative on behalf of the real economy, but devoted to tax structures which simply shift money from the generality of taxpayers to the financial sector, to regulatory arbitrage which seeks to gain an improved regulatory treatment of unchanged economic substance, or to accounting devices which attempt to put a favourable gloss on the underlying situation of firms or their clients, for instance understating a country’s true level of debt.”

The FSA has appointed John Griffith-Jones as deputy chairman of the FSA and FCA (Financial Conduct Authority) chair designate from 1 September.