Would a City equivalent of the Hippocratic oath have prevented the Libor-rigging scandal? Might it have deterred Lloyds Banking Group traders from cynically fixing the rate at which they borrowed emergency funds from the Bank of England? Or guided any bankers away from any one of the lengthy list of misdeeds committed in recent years, from insurance mis-selling to sanction-busting and drug-money laundering?

As Lloyds Banking Group was hit with penalties totalling £226 million (€286 million) for rate-rigging on Monday, a think tank called for a “bankers’ oath” to be brought in to “turn back the tide of scandal”.

In its report, Virtuous Banking, ResPublica argued that if bankers were to make a pledge along the lines of the medical profession's Hippocratic oath, it would encourage "virtue and responsibility" in the industry, raising standards and accountability.

Inherent lack of virtue

ResPublica director Phillip Blond believes the authorities have brought in the wrong sort of reform in recent years, ignoring the crucial root cause of the banking crisis: an inherent lack of virtue among our banking institutions.

“In order for us to have the banks we desperately need and the country deserves, bankers must recognise the good, do the good and be good. The bankers’ oath represents a remarkable opportunity to fulfil their proper moral and economic purpose, and finally place bankers on the road to absolution,” he said.

His call for bankers to affirm their honesty in an oath met with a mixed reception. Many in the industry say it would make little difference to bankers’ behaviour and that watertight reform is by far the better option. One of the key purposes of the oath would be to restore public trust in the banking industry but, such is the scale of their misdeeds, few believe they could be trusted to stick to their oath any more than they have abided by the rules in recent years.

Their contempt for the rules is graphically demonstrated in a series of email conversations released yesterday, revealing the collusion between the unnamed traders and managers. The picture they paint is of people who knew they were doing wrong but were confident they would get away with it. For some, it appeared to be a bit of a laugh.

“Every little helps . . . It’s like Tesco’s,” said one trader to his manager about a request to manipulate Libor.

“Absolutely, every little helps,” replied the Lloyds manager.

And this is the response from a Lloyds employee, on being told another trader would be setting “an obscenely high” figure: “Oh dear . . . my poor customers . . . hehehe!!

The Libor scandal came to light two years ago. Since then, seven banks have been hit by hefty fines for their part in the rate-rigging, including Barclays and the bailed-out Royal Bank of Scotland.

Bombshell

The Lloyds fines had been widely expected, and totalled £218 million, but there was a bombshell within the announcement, as it was revealed for the first time that traders had also been manipulating the repo rate on the emergency funds made available to the industry at the height of the financial crisis.

In other words, they were cheating the Bank of England by fiddling the rate so they paid lower fees as they helped themselves to the taxpayers' cash. This represents a new low, even for the banking industry, and Bank of England governor Mark Carney was understandably furious.

The manipulation was "highly reprehensible, clearly unlawful and may amount to criminal conduct on the part of the individuals involved", he thundered in a letter to Lloyds chairman Lord Blackwell.

Lloyds has been forced to repay the £8 million the central bank lost out on as a result of the fiddling, taking its rate-rigging bill to £226 million.

Carney’s point on criminal conduct is an interesting one and the Bank of England is considering whether to take further action against Lloyds and the individuals involved.

Lloyds suspended seven employees on Monday as investigations into the scandal continue, including three of the four traders involved in fixing the central bank’s repo rate.

Altogether, almost two dozen people are involved at Lloyds, some of whom had already been suspended or have quit the bank.

The prospect of someone serving prison time as a result of the scandal looks a distinct possibility. If that were to happen, it would be the first such action in the UK arising from the financial crisis.

Swearing an oath and promising to behave is all very well, but the threat of jail time would be a far more effective way of ensuring good conduct in the future.

Fiona Walsh is business editor of theguardian.com