David Cameron appeared to back down in the face of calls for criminal penalties for bankers today, when he pledged to bring forward recommendations made by a parliamentary commission.
The Treasury appeared to be opposing the plans last night, but in today's PMQs the prime minister said bankers would be held personally responsible for malpractice and that a new criminal offence of reckless management would be introduced, with a custodial sentence.
"Yes, I do support both of those measures," Cameron said.
"Obviously we need to take time to read this excellent report, but penalising - including criminal penalties against bankers who behave irresponsibly - I say yes.
"Also, that you can claw back bonuses [in publicly owned banks] - I say yes too."
Ed Miliband appeared put off by the comment, given that all the signs were that the government intended to oppose the measures.
"I'm glad he supports criminal penalties. Will the government put down appropriate amendments to the banking bill?" Miliband asked.
Cameron replied: "We will be using that bill."
Miliband told the prime minister that if his nerve failed him Labour would try to get the measure through itself.
"If the government doesn't put down the amendments, we will," he said.
Chancellor George Osborne set up the parliamentary commission on banking standards in the summer of 2012 amid public fury about the Libor scandal.
Its final report has concluded a new 'senior persons' regime needs to be set up to ensure important figures in the City took responsibility for their banks' actions.
But Treasury officials said ministers were unprepared to commit to implementing the proposals in full, as the City mounted a full-scale lobbying campaign to avoid being potentially criminalised.
Parliamentarians' call for a new criminal offence of 'reckless misconduct in the management of a bank' would see a custodial sentence backed up by a new licensing regime controlling all those deemed capable of doing 'serious harm'.
"There are tough criminal sanctions in the UK for those who engage in fraudulent behaviour," the CBI's director-general John Cridland complained, as the City made clear it would fight the move towards criminalisation.
"Enforcing these must come before the introduction of new sanctions."
Bankers' bonuses will also face a clampdown under MPs' proposals, with the commission recommending a reformed 'code' of remuneration which would see more payouts deferred - and for a longer period of time.
A Treasury spokesperson said it accepts the need for "increased personal responsibility especially at a senior level" and is prepared to use the banking bill to ensure the changes which need legislation are quickly pushed through.
Manipulations of the Libor rate have already been made a criminal offence.
"The chancellor should now get on and implement this report in the financial services bill currently going through parliament," shadow chancellor Ed Balls said.
"And he must rethink his refusal to implement some of the recommendations of the Commission's previous reports, including on the need for a backstop power for full separation of the banks. This is no time to duck radical reform."
Commission chair Andrew Tyrie, the Conservative backbencher who also chairs the Commons' Treasury committee, said "shocking and widespread malpractice" exposed by the Libor scandal meant changes were urgently needed.
"Where the standards of individuals, especially those in senior roles, have fallen short, clear lines of accountability and enforceable sanctions are needed," he said.
"They have both been lacking."
The Libor scandal rocked the City in the summer of 2012, when revelations about widespread fiddling of the interbank lending rate led to public anger there was no criminal offence which could see those responsible jailed.
Today's report reinforces the findings of a review of Libor's transparency carried out by Martin Wheatley, the chief executive-designate of the Financial Conduct Authority, last autumn.
The City is likely to claim the actions already taken since the Libor scandal broke means bankers have already cleaned up their act.
Existing bankers who submit data for the Libor process now have to be approved by the regulator and traders were warned that they face "criminal sanctions" including jail if they are found guilty of attempting to manipulate the Libor rate in the future.
Now senior bankers will be made accountable under the commission's proposals.
"Under our recommendations, senior bankers who seriously damage their banks or put taxpayers' money at risk can expect to be fined, banned from the industry, or, in the worst cases, go to jail," the report stated.
"That has not been the case up to now... Those responsible for failure, or whose actions do serious harm to their bank, its reputation or its customers, should know that they will be fully held to account for their actions.
"When their bank is enforced against, the key individuals would now be made to prove that they had taken all reasonable steps to mitigate the risk."
The switch would see the 'approved persons' regime replaced with a 'senior persons' regime ensuring the most important responsibilities are assigned to specific individuals.
Further moves to recover bonuses from individuals found guilty of reckless management of a bank would also be introduced.
On bonuses, banks would be required to disclose the range of measures used to determine their remuneration and it would be up to regulators to determine whether the right balance between risk and reward is being struck.
The watchdog would be empowered to insist on a deferral of up to ten years in the payout of a bonus. In the event of a government bailout, the regulator would be able to cancel all deferred compensation.
"Many bankers were on to a one-way bet. Unlike unlimited liability partnerships, they had little or no skin in the game," the report stated.
"Deferred remuneration for executives should not be viewed as an entitlement. People should keep their deferred bonuses only when it is clear that they have really been earned."