The British government is to set up an urgent independent review into the inter-bank lending rate next week in the wake of the interest rigging scandal.

The review will consider the future operation of the Libor rate and the possibility of introducing criminal sanctions.

Chief executive of Barclays - the first bank to be exposed in the scandal - has been summoned to appear before a Treasury Select Committee next Wednesday.

The review comes amid Labour demands for a full public inquiry into the affair.

The government believes its approach will ensure a speedier response to the issue, resulting in amendments to the Financial Services Bill this summer.

The review will be headed by an as-yet-undisclosed independent figure.

It will look into the current regulatory arrangements for the Libor and whether criminal sanctions for manipulation can be introduced.

Ministers are considering setting up a separate review into the professional standards of bankers.