The London interbank offered rate, the benchmark for $360 trillion of securities, may not survive allegations of being corrupted unless it's based on transactions among banks rather than guesswork about the cost of money.

“The methodology used to formulate Libor is totally unsuitable for the modern world,” said Daniel Sheard, chief investment officer of asset manager GAM U.K. Ltd., which manages about $60 billion. “The British Bankers' Association needs to come out on the front foot and say 'this is a system that was appropriate 20 years ago but is no longer appropriate and we are going to change it.'”

The BBA, the lobby group that has overseen Libor for 26 years, is under pressure to find an alternative way to calculate the benchmark, or cede control of it. Regulators from Canada to Japan are probing whether banks lied to hide their true cost of borrowing and traders colluded to rig the benchmark, the basis for interest rates on securities from mortgages to derivatives.