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

“The methodology used to formulate Libor is totally unsuitablefor the modern world,” said Daniel Sheard, chief investment officerof asset manager GAM U.K. Ltd., which manages about $60 billion.“The British Bankers' Association needs to come out on the frontfoot and say 'this is a system that was appropriate 20 years agobut 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 thebenchmark, or cede control of it. Regulators from Canada to Japanare probing whether banks lied to hide their true cost of borrowingand traders colluded to rig the benchmark, the basis for interestrates on securities from mortgages to derivatives.