(Bloomberg) — If Barclays Plc would lie about its borrowing costs, what else would it lie about?

That question gets to the heart of the damage Barclays did to itself by submitting false numbers for years to the British Bankers’ Association as part of the surveys used to set the London interbank offered rate, the benchmark for $360 trillion of financial instruments globally. The most important asset any bank has is trust — especially when it comes to the figures on its own financial statements. Whatever credibility Barclays had, it’s been poured down the drain like last night’s suds.

Andrea Leadsom, a member of the U.K. parliamentary committee that grilled former Barclays Chief Executive Officer Robert Diamond at a hearing two days ago, framed the issue well when she asked Diamond: “In light of the fact that your audit failed to notice for several years that there was fraud and corruption going on under your noses and very openly, have you now looked at other areas of the bank to see whether something like that has been going on there for years, too?”

Diamond, who resigned July 3, replied: “Of course.” His terse response came off as less than credible. Later he said: “The way to do that is to start by going through our processes and our controls and our audit reports. And if someone wasn’t happy with those and made suggestions that there were other places to look, of course we would do it.” So, perhaps Barclays made such an inquiry. Or maybe it would, if someone became unhappy. It’s hard to tell.

The trust deficit is evident in Barclays’s market value. At 20.6 billion pounds ($32 billion), Barclays trades for a mere 37 percent of its common shareholder equity, which shows that investors believe most of its 55.6 billion pounds of book value is fictional. The price-to-book discount also can be explained partly by the soft nature of some of the bank’s assets.

Barclays showed 7.8 billion pounds of intangibles as of Dec. 31 — things like goodwill and customer lists — as well as 3 billion pounds of deferred tax assets. Such items would be useless in a crisis. (Barclays discloses full financial statements twice a year and has yet to provide results for the first half of 2012.)

Additionally, in the footnotes to its annual report, the company said the fair market value of its loans was 14.6 billion pounds less than their carrying value on its books. The bank also said about 32 billion pounds of its financial assets were of the Level 3 variety, which means their values depended on data that weren’t observable in the marketplace, making them easy to fudge. The less investors trust Barclays, the less they will trust these kinds of subjective estimates.

Barclays shares fell 16 percent after news broke last week that the company had been fined $453 million by U.S. and U.K. authorities. Clearly, Diamond and Barclays’s outgoing chairman, Marcus Agius, who will leave after helping find Diamond’s successor, had to step aside to show the company cared about its reputation. (The company’s chief operating officer, Jerry Del Missier, also resigned.)

It must do more. For instance, the head of Barclays’s audit committee, Michael Rake, was the chairman of the accounting giant KPMG International when its U.S. affiliate, KPMG LLP, was caught selling fraudulent tax shelters to hundreds of wealthy Americans. That resulted in $456 million of fines by the Justice Department in 2005 and an admission of criminal wrongdoing by the U.S. firm. Although Rake wasn’t implicated in any way, his promotion this week to deputy chairman of Barclays looks like an obvious case of the wrong person for the job at a time when appearances are everything.

Barclays’s auditor, PricewaterhouseCoopers, looks more like a public-relations firm than a skeptical watchdog. Last year, as part of its annual “Building Public Trust Awards,” it gave Barclays two runner-up accolades, including one in the category of “tax reporting,” according to the firm’s website.

Talk about a gaffe: Last month a Milan judge ordered 20 bankers and former managers of Barclays and the Italian bank UniCredit SpA to stand trial on tax-fraud charges. The tax probe was linked to a complex investment plan arranged by Barclays known as Brontos, where interest payments on deposit accounts allegedly were made to look like dividends, which were taxed at lower rates, according to a June 5 article by Bloomberg News.

Barclays in a statement last month said it didn’t violate any laws. Members of Parliament at this week’s hearing also noted that Barclays’s accounting practices have come under regulatory scrutiny before — particularly the bank’s use of a Cayman Islands company called Protium in 2009 to transfer several billion pounds of troubled assets off its balance sheet.

What’s truly depressing is the thought that Barclays is only the first bank to settle with regulators over the Libor affair. Eventually, when others reach their own accords, similar inquiries will be made of their top officers.

Enforcing the law may be destabilizing at times. It also is necessary. Hopefully banking regulators now are waking up to this realization for good. A proper reckoning for the industry has been a long time coming.

(Jonathan Weil is a Bloomberg View columnist. The opinions expressed are his own.)