Libor scandal: Treasury sets terms of Wheatley Review

The government has given the review into how the Libor rate-setting system works just two weeks to publish its initial findings.

The Treasury said the timetable for the Wheatley Review was "challenging".

It will look at the how the Libor rate, which is the benchmark interest rate for millions of financial transactions, is calculated and regulated.

A group of banks submit their estimates of their borrowing costs to a committee that calculates the rate daily.

Barclays was found to have tried to manipulate Libor rates, by putting in inaccurate submissions, resulting in a record fine from US and UK regulators.

The system is currently overseen by the British Bankers' Association, but is not formally regulated by the Financial Services Authority or Bank of England.

The Wheatley Review will come up with proposals in a number of areas including:

The regulators' investigations into Barclays revealed that its traders had worked with staff at other banks.

It is therefore widely expected that other banks will face fines for manipulating Libor. There could also be criminal sanctions against some individuals.

The chief executive of Royal Bank of Scotland, Stephen Hester, has told the Guardian newspaper that he expects his bank to be fined for its involvement.

"We'll have our day in that particular spotlight as well," he said.

There will be a four-week consultation period after the initial proposals are published. The review will aim to finalise its conclusions by the end of September.

It will be led by Martin Wheatley, the managing director of the Financial Services Authority.

He said the misconduct was "extremely serious" and showed that "urgent reform of the Libor compilation process is required".