The affair had dealt a “huge blow” to the industry’s reputation, said the chairman of the Financial Services Authority (FSA), Lord Turner (pictured), who added that investment banking should be purged of its “culture of cynical entitlement”.

“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,” he said at the FSA’s annual public meeting.

Turner added that much of investment banking was socially useless. He pointed to the creation of complex tax-avoidance schemes, attempts to dodge the full impact of financial regulation and the use of accounting to gloss over the debts of banks, clients and even countries.

He also warned that one of the FSA’s two successor bodies, the Financial Conduct Authority, would consider scrutinising more strictly the way banks dealt with professional clients, such as pension funds and insurance firms, and not only regulate their dealings with the retail customers.

“An insurance company or pension fund may be itself a large institution, but sitting behind the company or pension fund are retail investors. Any poor practice, which unreasonably shifts income to the industry, is at the expense of some end retail customer,” he said. “Shoddy wholesale practice is not a victimless act, even in those cases where it is not defined as a crime.”

To read Turner’s full speech, visit bit.ly/R1ag5I