The Libor affair is not officially on the agenda of Tuesday's 0900 GMT hearing of parliament's Treasury Select Committee, which is scheduled to question King, his deputy Paul Tucker, top regulator Adair Turner and other officials about the BoE's Financial Stability Report and schemes to get credit flowing.

But after marathon sessions with former senior Barclays executives and other regulators, British lawmakers will not miss the opportunity to press King on when he first suspected Libor might be rigged and why he intervened to ease Diamond out.

On Monday, Turner told the committee that he had already conveyed to Barclays' chairman Marcus Agius that Diamond should leave and was surprised that then Agius decided to step down.

While the Libor saga is likely to overshadow the scheduled topics, the hearing takes on extra significance from the fact that Tucker and Turner are both seen as strong contenders to succeed King at the helm of Britain's central bank next year.

The lawmakers will also take views from Financial Policy Committee member Donald Kohn and BoE director Paul Fisher on recent steps to ease liquidity constraints on banks in order to get more credit flowing through the recession-hit economy.

"DECEITFUL"

The scandal started with Barclays' admission that its traders manipulated the bank's contribution to the London Interbank Offered Rate, or Libor, the rate at which banks lend to each other and which serves as benchmark for many other rates and contracts.

Only days after the affair broke, King launched an angry attack on British banking culture, saying something had gone very wrong with an industry which he derided for resorting to "deceitful" methods to make money.

Diamond stepped down four days later, and Barclays' chairman Agius confirmed in his committee appearance that King intervened, saying the governor made it "very plain", that Diamond no longer enjoyed the support of his regulators.

But then the central bank itself got dragged in when a 2008 memo from Diamond appeared to suggest that BoE deputy governor Tucker had condoned the rate-rigging.

The Treasury Committee found no evidence when it grilled Tucker, but the committee chair Andrew Tyrie left little doubt that he was not impressed by the central bank's handling of the doubts raised about Libor's quality at the time.

On Monday, Jerry del Missier, who quit as Barclays' chief operating officer, told the committee he ordered staff to manipulate rates in line with instructions from his then boss Diamond, following the conversation Diamond had with Tucker.

So King -- who has had many testy exchanges with Tyrie in the past -- is likely to face more questions about whether the central bank was fully on the ball in 2008 when concerns about this key rate were raised by banks and U.S. regulators.

Revelations that then New York Fed chief Tim Geithner had recommended to King to overhaul Libor have raised questions over whether supervision of the benchmark rate had been too lax.

Libor is compiled from estimates by big banks of how much they believe they have to pay to borrow from each other. It is used for $550 trillion of interest rate derivatives contracts and influences rates on mortgages, student loans and credit cards.

(Reporting by Sven Egenter; Editing by Ruth Pitchford)

• A Permanent Economic Emergency