He called on senior managers to reform the culture and values at their banks to curb such behaviour.

In June, the UK and US authorities fined Barclays £290 million for manipulating money market benchmark rates.

Before 2007, traders at Barclays sought to manipulate rates in order to obtain a financial benefit. Later, during the global financial crisis, Barclays altered rates due to reputational concerns.

Lord Turner said: "There is a debate as to whether the authorities could have been more alert to the 2007 and 2008 manipulation.

"But in relation to the earlier period, to the manipulation of rates by a minute amount for a short period in either direction, I do not believe these problems could have been spotted from outside except via supervision so intensive as to be prohibitively expensive."

Other banks are also being investigated over the matter.

Lord Turner, a frontrunner to replace Sir Mervyn King as governor of the Bank of England, said he thought such problems are now in the past.

"People are trying to do it as honestly as they can," he said.

Lord Turner warned that in future, regulators will take a tougher stance on dealings between financial institutions.

He said "shoddy" conduct "is certainly not a victimless activity" because it can hurt end customers such as pension policyholders.

"A somewhat more inter-ventionist approach to whole- sale conduct issues is therefore likely to be appropriate," he said.

Lord Turner warned that forthcoming industry reforms, forcing banks to separate their retail and investment banking arms, "are not sufficient to ensure stability". He said: "Yes, complex investment bank trading activity played a role in the origins of the financial crisis – the failure of Leh-man's was a crucial event; but so too did over-rapid expansion of plain old lending to commercial real estate companies – HBOS also failed."

Asked about succeeding Sir Mervyn in an interview with Bloomberg yesterday, Lord Turner said: "I would obviously not rule myself out."