The Treasury Select Committee has called for urgent changes to the way banks operate and are regulated, in a bid to restore the public's faith in them.

The cross-party MPs - in their first full report into the way bankers and regulators handled the Libor rate-rigging scandal - slammed the disgraced former Barclays boss, Bob Diamond for being 'highly selective' in his evidence.

They also criticised the Financial Services Authority (FSA) and Bank of England's regulatory supervision for being too slow to spot the unfolding events that led to the series of high profile resignations at Barclays and the £290m fine slapped on the bank for its role in the fixing ruse in June.

Committee chairman Andrew Tyrie said: 'The sustained rigging of a crucial benchmark rate has done great damage to the UK's reputation. Public trust in banks is at an all-time low. Urgent improvements, both to the way banks are run and the way they are regulated, [are] needed if public and market confidence is to be restored.

'The committee has called for action in a number of areas, including: higher fines for firms that fail to co-operate with regulators, the need to examine gaps in the criminal law, and a much stronger governance framework at the Bank of England.'

The MPs said they blamed senior management at Barclays bank for the way employees repeatedly attempted to manipulate the Libor rate between 2005 and 2009 - a period of 'extremely weak internal compliance and board governance at Barclays'.

Tyrie dubbed Diamond's evidence to the committee as at times being 'highly selective' and 'fell well short of the standard that parliament expects, particularly from such an experienced and senior witness'.

But Barclays has hit back saying it did not expect to agree with all the findings but will 'carefully consider this comprehensive report'.

The 122-page report also criticised the authorities for only appearing to act in response to public anger. It accused the Bank of England of 'naivety' in not spotting there was 'dishonesty' was taking place in the setting of Libor rates. The FSA's failings were 'more serious', it said.

The reform of how Libor is calculated is currently being reviewed by FSA chief Martin Wheatley.