FRANKFURT, Jan 22 (Reuters) - Elke Koenig, president of German financial regulator BaFin said it remains to be seen whether a corrupted system of setting key benchmark interbank lending rates can be reformed.
"It has been shown that benchmarks, which are based on estimates submitted by market participants, are susceptible to manipulation," Koenig said, adding that the alternative of basing the benchmark rate on actual transactions was equally difficult given that in times of stress, there are phases when hardly any transactions take place.
"In my view we need to work not on a reform of the existing system but on a replacement for it," she said at the regulator's annual reception on Tuesday.
More than a dozen banks are under investigation by authorities in Europe, Japan and the United States over the suspected rigging of the London interbank offered rate, a key interest rate used in contracts worth trillions of dollars globally.
The potential manipulation of Libor burst into the headlines in June when British bank Barclays was fined a record $450 million by UK and U.S. authorities for allowing traders to manipulate rates during the 2007/08 credit crunch.
Deutsche Bank said in July initial findings from an internal probe into alleged rigging of global interest rates found that no members of the management board behaved inappropriately, but two former traders may have been involved in colluding to manipulate global benchmark interest rates.
Libor rates submitted by banks are compiled by Thomson Reuters, parent company of Reuters, on behalf of the British Bankers' Association. (Reporting By Edward Taylor and Jonathan Gould)