Shares at Barclays closed down 15.53 percent and other big players in the sector also took a hit, as analysts fear the effects of the interest rates scandal could be very serious for the UK financial markets.

RBS closed down 11.45 percent, Lloyds fell 3.9 percent and HSBC closed 2.58 percent lower than on Wednesday.

There was huge political uproar in Westminster as UK Prime Minister David Cameron said Barclays management had “serious questions to answer,” and insisted “people have to take responsibility for the actions and show how they're going to be accountable.”

Chancellor Osborne said the behaviour of the bank is “an epitaph to an age of irresponsibility,” and Barclays chief executives should “pay the price” of the fraud investigations.

Barclay's CEO Bob Diamond had an opportunity to explain himself at an analyst meeting at Morgan Stanley yesterday, and published an open letter to chairman of the Commons Treasury Committee, Andrew Tyrie. Diamond said other banks had forced Barclays to act in the manner in which it did, and that the regulatory authorities had no evidence for any manipulation other than from “immediate desk supervisors.” He also stated emphatically he would not be resigning.

FSA announced Barclays is one of 20 international banks being investigated of misleading customers on the value of interest rates, responsible for thousands of mortgages and savings, between 2005 and 2009. The other banks co-operating with the regulator and the US Commodity Futures Trading Commission, include UBS, HSBC, Lloyds, and RBS, who all adjust their share prices to the Libor rate. business editor Allister Heath believes the scandal “will run and run.”

“Just when it seemed the industry was on the mend, this latest blow could set it back years,” he said. “And this time those institutions being targeted actually deserve the opprobrium they are getting.”