UK banks face new scandal; Barclays boss in peril LONDON (Reuters) - Britain will expose on Friday a second scandal involving the country's banks in as many days, as Barclays boss Bob Diamond clings to his job after regulators slapped a record fine on the lender for rigging interest rates. The Financial Services Authority will announce it has found evidence that banks mis-sold products to protect small businesses against a rise in interest rates, a person familiar with the matter said. With public, political and business outrage at bankers' behavior deepening, the industry is likely to draw compensation claims that could cost it billions of pounds, legal experts say. A string of mis-selling cases has rocked the financial services industry for over two decades and banks are already likely to pay upwards of 9 billion pounds ($14 billion) in compensation for mis-selling loan insurance. While a number of banks are likely to be drawn into the latest mis-selling scandal, Diamond has found himself first in the firing line after U.S. and British authorities fined Barclays $450 million on Wednesday for manipulating the London interbank offer rate (Libor). Prime Minister David Cameron said Diamond - who was running the investment banking arm Barclays Capital when the rigging occurred in 2005-2009 - and other bosses had some "big questions to answer." Britain also called in the fraud squad to investigate possible crimes. "Politicians have already been baying for blood and calling for the head of Bob Diamond, especially as he was in charge at BarCap at the time," said Stephen Peak, manager of the Henderson UK Alpha and European Absolute Return funds and a shareholder in the bank. We feel that the Barclays board will instinctively wish to resist this, as Diamond is clearly the architect and leading light of Barclays, but feel that the pressure may be too great. Diamond, whose fat bonuses following the financial crash of 2008-09 drew widespread criticism, won few political friends last year when he told a parliamentary committee that it was time for bankers to stop apologizing. Shares in Barclays slumped 15 percent on Thursday on concern that Barclays will face lawsuits from U.S. investors and that Diamond may go. Diamond admitted in an open letter to Britain's Treasury Select Committee on Thursday that the bank engaged in "inappropriate behavior" to lower submissions. In his letter, Diamond said the investigation highlighted two types of manipulation used by the bank, and he would happily attend a Treasury Committee meeting on the issue. The Libor scandal, which disclosed e-mails in which bankers appeared to promise bottles of champagne to each other for help in setting the rates, has fuelled the anger with the financial industry. Authorities in Europe, North America and Japan are investigating many banks which help to set Libor, and others are expected also to be heavily fined. Shares in RBS and Lloyds also fell sharply on Thursday. Reporting by Steve Slater, Huw Jones and Sinead Cruise; Editing by David Stamp and Richard Pullin