Labour leader Ed Miliband has called for a full public inquiry into the behaviour of large banks as the City was hit by two major scandals within the space of a week.

The opposition leader said the industry had been plagued by "institutional corruption" that could only be weeded out by introducing a tough new code of conduct and jail sentences for those who abuse the system.

The comments were supported by Bank of England Governor Sir Mervyn King who demanded a "real change in culture" as Britain's lenders were left reeling following a week blighted by controversy.

Mr Miliband's calls for a 12-month probe aim "to find out what is going on in the dark corners of the banks" after the FSA uncovered "serious failings" in the sale of complex financial products to small businesses.

The FSA's findings came just days after the rate-rigging affair emerged at Barclays.

Meanwhile, taxpayer-backed Royal Bank of Scotland also confirmed it was being investigated for manipulating the rates at which banks lend to each other, known as Libor.

Mr Miliband said: "There hasn't been a proper reckoning for what happened in the banking crisis. The bankers told us - it's all fine, we've cleaned everything up. But I'm afraid that doesn't hold water anymore."

He added: "We've got to have an open, independent inquiry with hearings to find out what is going on in the dark corners of the banks.

"Some of it clearly was illegal, but it goes well beyond that.

"There is a problem with how people operate. This isn't just about regulation, it's also about culture and ethics."

Sir Mervyn said he believed a Leveson-style inquiry was not needed, but slammed conduct in the industry.

He said: "From excessive levels of compensation, to shoddy treatment of customers, to a deceitful manipulation of one of the most important interest rates and now news of yet another mis-selling scandal we can see we need a real change in the culture of the industry."

He added that hard-working bank staff have been "let down" and that banks now needed "leadership of an unusually high order".