The U.K. trade body that oversees the setting of the London interbank lending rate (Libor) says that it is considering its stance over how the rate-setting process is to be regulated after Barclays bank was was hit with a record fine for trying to manipulate the benchmark interest rate.

The British Bankers’ Association (BBA), which in March had said that it had no plans to surrender oversight of Libor to U.K. regulators after the Financial Services Authority (FSA) started a review process on how the system may be overhauled, appears to have changed its tune following the furore surrounding Barclays.

Barclays admitted earlier this week that its submissions to the Libor process, which is set by a 16-bank panel including Barclays, from 2005-2009 were improperly affected by requests from traders to move the rate to the benefit of their derivative positions, as well as by a desire to make the bank look stronger during the financial crisis. Barclays also admitting manipulating another global benchmark interest rate, the European interbank offered rate (Euribor).

“The British Bankers’ Association is shocked; this is an announcement with extremely serious implications,” the BBA said in a statement. “The banks which contribute to the Libor rate must meet the necessary obligations to their regulators.

“The BBA has proactively co-operated with the authorities at every stage and will continue to work with the regulatory investigations into Libor, submitting information and making staff available for interview.

“The current Libor review, with which our authorities are fully engaged, has been under way since March this year and is considering all aspects including the setting process. As part of this review we will now be asking the authorities to consider in what manner the Libor setting mechanism should be regulated in the future.”

Barclays, which has seen its share price fall by 15% in the last two days, has been fined £290 million over the incident after investigations in both the U.K. and the U.S.. Shares in the Royal Bank of Scotland, Lloyds Banking Group and HSBC have also fell sharply. The FSA is also now looking into other banks.

“Barclays’ misconduct was serious, widespread and extended over a number of years,” said Tracey McDermott, acting director of enforcement and financial crime at the FSA.

“The integrity of benchmark reference rates such as Libor and Euribor is of fundamental importance to both UK and international financial markets. Firms making submissions must not use those submissions as tools to promote their own interests.

“Making submissions to try to benefit trading positions is wholly unacceptable. This was possible because Barclays failed to ensure it had proper controls in place. Barclays’ behavior threatened the integrity of the rates with the risk of serious harm to other market participants.

“The FSA continues to pursue a number of other significant cross-border investigations in this area and the action we have taken against Barclays should leave firms in no doubt about the serious consequences of this type of failure.” 

The UK government is also now considering widening the criminal market abuse regime to include over-the-counter derivatives and manipulation of Libor. The coalition is already reforming the regulatory regime and dismantling the FSA. While Bank of England governor Mervyn King has called for a major overhaul of the Libor system. “The idea that my word is my Libor is dead,” he said.

Libor, which serves as a fundamental benchmark to around £350 trillion of financial contracts around the world, is a notional rate set by a 16-bank panel. They are all asked how much it would cost to borrow from one and other and the rate is then calculated and published daily by global news and information provider Thomson Reuters on behalf of the BBA, covering a variety of currencies and time durations.

Libor is used as the primary benchmark of short-term interest rates globally, a barometer to measure strain in the money markets and the basis for settlement of interest rate contracts on many of the world’s major futures and options exchanges. Asset managers also use Libor as a benchmark for a number of funds.

A former employee of Barclays, meanwhile, has spoken out against the Libor regime. Tim Bond, who was chief strategist at the time of the manipulation, told the Daily Telegraph newspaper: “The system was pretty weird and it’s not something you would try to invent if you were going to create it again.”