Britain’s biggest banks are facing a parliamentary probe into their professional standards as the rate-rigging storm gathers pace.

Chancellor George Osborne said the review, led by Treasury Select Committee chairman Andrew Tyrie, would look at “transparency, conflicts of interest, culture and the professional standards” in the banking industry.

The move came after Barclays chairman Marcus Agius resigned over the affair and announced an internal review into the bank’s “flawed” practices.

Despite mounting calls for his own departure, Barclays chief executive Bob Diamond showed no signs of stepping down soon, telling employees in a letter: “I am committed to ensuring the recommendations of this review are implemented in full.”

The American banker, who will appear before MPs on Wednesday, said he was disappointed that the attempts to fix the Libor, the rate at which banks lend to each other, happened on his watch and would “make sure that it cannot happen again”.

Discussing the parliamentary review, which will report back by the end of the year, the Chancellor said: “I don’t think a long costly public inquiry is the right answer. It would take months to set up and years to report. We know what went wrong. We can’t wait until 2015 or 2016 to fix it.”

He said recommendations by the joint committee, if accepted, will be built into the Banking Reform Bill next year. An independent review of the regulation of Libor, the rate at the centre of the scandal, will also take place and will be headed by Martin Wheatley, the chief of the Financial Conduct Authority. His review will also look at the adequacy of the UK’s current civil and criminal sanctioning powers with regards to financial conduct and market abuse.

Mr Osborne confirmed the Government will propose amendments to the Financial Services Bill to ensure fines paid by the financial services industry in future go to the taxpayer. The new arrangement will apply to fines received from April 1 so will include the penalty imposed on Barclays by the FSA last week.

Mr Osborne added: “We’re changing the failure regulation, reforming the banks, now it’s time to deal with the culture that flourished in the age of irresponsibility and hold those who allowed it to do so to account.”

But Labour leader Ed Miliband vowed to continue pushing for a “full and open” independent inquiry. He said: “I’m not convinced by his way forward because I do not believe it measures up to the scale of what is required.”