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People use a line of Barclays cash dispensers in central London, June 28, 2012. Britain said on Thursday it had brought in the fraud squad to investigate possible crimes and would tighten laws over attempts to manipulate lending rates, a scandal which has engulfed Barclays and is expected to spread to other banks.

Paul Hackett/Reuters

One of the world's key interest rates is on the brink of an overhaul as the banking group that has long been responsible for its oversight said it could surrender the role.

Libor, the rate at the heart of a rigging probe, is used to assign other rates to trillions of dollars of financial products and services, from mortgages to derivatives. The London Interbank Offered Rate has, until now, been set using data from banks, based in turn on how much it costs them to lend to each other.

The Financial Services Authority, a British financial regulator, is set to release the findings of its Libor probe this week.

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The British Bankers' Association, Libor's overseer, said Tuesday it would support the FSA's managing director, Martin Wheatley, if his recommendations "include a change of responsibility for Libor."

The quest to rearrange the oversight of this benchmark rate began this summer when a rate-rigging scandal erupted, sparking probes by international regulators.

Already, Barclays Bank PLC has agreed to pay more than $450-million (U.S.) in penalties.

That sparked widespread calls for changes to the system. Mark Carney, the Bank of Canada Governor and head of the global Financial Stability Board, called the "active, conscious, repeated manipulation of that index" a "deeply troubling" situation at a press conference.

Besides Barclays, a number of other institutions have faced scrutiny.

But the solutions to fixing the Libor system may not be as simple as taking it from the hands of BBA.

The FSA will likely suggest pegging the Libor rates to real market trades and transactions to remove some control from banks. This could be adapted to requesting banks submit data with their rates to increase transparency. Banks are unlikely to favour such a public display of their actions, though, so another solution might be demanded.

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Among the other proposals floated about so far are the European Commission's suggestion that manipulating Libor be made a criminal offence, and U.S. Federal Reserve chairman Ben Bernanke's idea to use the a different benchmark rate.

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