Chancellor George Osborne has been accused of "buckling to pressure" from the big banks after it emerged he is planning to water down a tough accountability measure introduced in the wake of the financial crash.
Under the rule - due to come into force in March next year - senior executives would have to show that they took every reasonable step to ensure staff behaved ethically and responsibly.
This would mean that they would not be able to escape disciplinary action over scandals like the rigging of the Libor lending rate by claiming they did not know or understand what high-paid traders were doing.
Changes being introduced in the Bank of England Bill currently going through Parliament would move the burden of proof on to regulators, requiring them to show that a senior manager has not taken the necessary steps before they can bring disciplinary proceedings.
Liberal Democrat economics spokeswoman Baroness Kramer is pushing for a vote in the House of Lords on Tuesday on an amendment to restore the original accountability measure, which was backed by the Commission on Banking Standards and introduced by former business secretary Sir Vince Cable during the coalition government.
Lady Kramer said: "It beggars belief that the Government is planning to water down rules to hold top bankers to account.
"It is as if they have already forgotten about the 2008 crash, Libor fixing or any one of the other scandals that cost the taxpayer billions.
"This is an outrageous decision from George Osborne who has clearly buckled to pressure from his friends in the banks. He should be focusing on ways to protect British people, not protecting high fliers in the city.
"Senior managers in our banks should not be allowed to wash their hands of failings. Ignorance is not an excuse when our economy and British livelihoods are on the line."
A Treasury spokesman said: "The Government has taken concerted action to improve conduct across the banking sector and deal with the abuses and unacceptable behaviour of the past.
"We've introduced the toughest rules on bankers' pay of any major financial centre, and hardwired responsibility and accountability into the financial system, with those senior managers responsible for bringing down banks facing up to seven years in prison."