The British Bankers' Association (BBA) on Tuesday said that it was willing to give up its role of setting the Libor interest rate in the wake of a rigging scandal that rocked Barclays.
The announcement by the bank lobby group followed reports that a review of Libor by Martin Wheatley, managing director of Britain's financial regulator, will on Friday call for the BBA to lose the pivotal rate-setting role.
"The BBA seeks to work with the Wheatley review team as they complete their consultation on the future of Libor," said a short statement Tuesday.
"If Mr Wheatley's recommendations include a change of responsibility for Libor, the BBA will support that," it added.
The Libor scandal erupted in June when Barclays bank was fined £290 million ($470 million, 363 million euros) by British and US regulators for attempted manipulation of Libor and Euribor interbank rates between 2005 and 2009.
This in turn led to the resignations of three leading Barclays executives -- chief executive Bob Diamond, chairman Marcus Agius and chief operating officer Jerry del Missier.
The fallout risks becoming much wider, however, with analysts claiming that the lender could face massive lawsuits, since mortgage rates passed onto customers were influenced by Libor rates.
Barclays was the first bank to be fined as part of a global probe into suspected manipulation of the twin interest rates that are crucial to the operation of short-term financing and global markets.
Libor (London Interbank Offered Rate) is a flagship instrument used all over the world, affecting what banks, businesses and individuals pay to borrow money. Euribor is the eurozone equivalent.
The Libor rate is calculated daily, using estimates from banks of their own interbank rates.
In an initial review into Libor published in early August, Britain's financial regulator, the Financial Services Authority (FSA), concluded that London's interbank interest rate was "no longer fit for purpose".
Wheatley, who heads the conduct regulation unit for the FSA and was appointed by the British government to review Libor, has set out to examine potential reform of the current framework for setting and governing the rate.
The Libor system has been found to be open to abuse, with some traders lying about borrowing costs to boost trading positions or make their bank seem more secure.