Bank of England Governor Mervyn King told fellow central bankers in a letter that it was "very clear that radical reforms of the Libor system are needed".

Fed Chairman Ben Bernanke and global financial regulator Mark Carney, who is also governor of the Bank of Canada, on Wednesday floated possible alternatives to the London interbank offered rate, which some bankers manipulated in the 2007-09 financial crisis.

"There are different alternatives if Libor cannot be fixed," Carney told a news conference in Ottawa.

"If it's structurally flawed and can't be fixed -- which is a possibility -- there may need to be different types of approaches, and we need to think that through."

The concerns over Libor prompted scrutiny of lending benchmarks elsewhere. The European Central Bank (ECB) is putting pressure on the organizers of Euribor to shore up faith in the euro benchmark, sources familiar with the matter told Reuters.

Singapore, Hong Kong and Japan announced reviews of the way interbank benchmark rates were set in the Asian financial centers, while in South Korea the anti-trust agency widened a probe into possible rate-fixing.

Bank of England Governor King put the Libor issue on the agenda of the Economic Consultative Committee of global central bankers that will meet in Basel, Switzerland, on September 9, a central bank source said.

The discussions will continue there the following week at the Financial Stability Board's steering committee, which is chaired by Carney and which also includes financial regulators.

"There is an attraction to moving to obviously more market-based rates if possible," Carney said in his news conference.

Libor is used for $550 trillion of interest rate derivatives contracts and influences a wide array of financial products from mortgages to credit cards, and Carney said it was crucial that markets be able to have "absolute confidence" in it.

Carney mentioned the possibility of using repo rates and Overnight Index Swap rates, two ideas also mentioned on Wednesday by Bernanke. The Fed Chairman singled out Treasury Bill rates as a potential benchmark, but said the Fed had not come out in favor of a specific alternative.

RATE-RIGGING SCANDAL

Dozens of banks, including JPMorgan Chase & Co and Deutsche Bank, are under investigation in the rate-rigging scandal, where banks low-balled the rate to profit on trades and hide their own borrowing costs during the 2007-09 financial crisis.

Barclays Plc has already settled with U.S. and British regulators, paying a $453 million penalty.

Goldman Sachs Chief Executive Lloyd Blankfein said in Washington the scandal only built on the American public's mistrust of the industry after the 2007-2009 financial crisis.

"There was this huge hole to dig out of in terms of getting the trust back, and now it's just that much deeper," he said.

In Asia, the Hong Kong Association of Banks said it was reviewing the mechanism for determining its Hibor benchmark. The Hong Kong Monetary Authority said it supported the review and would monitor the process and outcome.

The Monetary Authority of Singapore said it was examining the setting of the Singapore interbank offered rate (Sibor), widely used in the pricing of mortgages and other loans in the city-state.

South Korea's Fair Trade Commission has investigated nine banks and 10 brokerages this week over suspected collusion in setting three-month certificate of deposit (CD) rates.

The Japanese banking industry lobby has asked the 18 banks contributing to the Tokyo interbank offered rate (Tibor) to check whether correct procedures were being followed, although the group's head said he did not believe there was a problem.

"We don't think there's any problem with (Tibor), but we decided on a check given growing public interest in Libor," the association's director, Shin Takagi, told a meeting of ruling party lawmakers on Thursday.

ALTERNATIVE RATES

Libor is calculated daily in London for the U.S. dollar and other currencies when panels of banks submit estimates of how much it costs them to borrow from each other.

It is thus a subjective call, as opposed to basing benchmarks more objectively so less manipulation is possible. The Australian Bank Bill Swaps Reference Rates, for example, are based on where paper is actually traded on the market.

The issue is similar for Euribor -- launched with the single currency in 1999 -- prompting the ECB to call for a re-think, including possibly shifting the basis of the calculation to actual lending rates.

"The big choice one has to make is whether you want posted rates or actual rates ... so at the end of the day, banks say what transaction they had at which price," said one central bank source. "If you use actual transactions you would have solved the problem."

Carney highlighted the Canadian Dealer Offered Rate because it is a committed rate: "It's actually a borrowing rate that is used by banks on a regular basis, almost daily basis when they take down syndicated BAs (banker acceptances)."

"So we may end up, we may -- I don't want to prescribe, it's very early days -- but we may end up with different types of rates used in different currencies," he said.

It is not a foregone conclusion that Libor will be abandoned, even if membership on Libor panels is voluntary.

Asked what would happen if banks pulled out, Carney said: "The best institutions recognize that they have a responsibility to remain in these panels and continue to post their estimates of where they can borrow."

He added: "To continue to do so ... isn't asking much."

He said most banks have posted figures accurately and "we should be a little careful not to tar all institutions in the panel with the actions of some." But wrongdoers "need to substantially raise their game" to levels of conduct expected in any other aspect of life.

U.S. Treasury Secretary Timothy Geithner was forced to defend himself on Wednesday against criticisms that regulators should have taken bigger steps to address concerns over Libor.

In June 2008, Geithner, then head of the New York Federal Reserve, sent an email to Bank of England's King, recommending six ways to enhance the credibility of Libor after Barclays had flagged concerns as early as 2007.

"The U.S., to its credit, set in motion at that stage a very, very powerful enforcement response, the first results of which we have now seen," he said in New York.

(Editing by Janet Guttsman, Tim Dobbyn and John Mair)

• A Permanent Economic Emergency