Global financial regulators will review whether to scrap the Libor system, and I think they’ll actually make the correct call here. The reputational risk from this scandal has been massive, not only to the banks but to the regulators. And at the heart of it is the simple question: why is the benchmark lending rate for several trillions of dollars in financial products so easily gamed? Why is it based on the subjective views of one set of submissions by the banks, instead of a verifiable interest rate in the market?

Ministers on Monday announced the remit for Martin Wheatley to investigate the Libor benchmark rate, which has been heavily criticised after it emerged that Barclays and several other leading banks manipulated it. Mr Wheatley is the chief executive-designate of the new Financial Conduct Authority, the incoming City watchdog.

The terms of reference for the Wheatley review include considering whether the rate should be set based on transactions made by traders, rather than the estimate of the rate at which their banks are borrowing at any given time.

Mr Wheatley said: “This benchmark rate is used globally for trillions of dollars worth of financial contracts. Therefore, it is clear that urgent reform of the Libor compilation process is required.

“Such reform may include amendments to the technical definitions used for Libor, the associated governance framework and the role of official regulation. The review will also consider whether similar measures are required for other existing benchmarks.”

British financial regulators will need to save their credibility by acting quickly and strongly. They’re going to kill Libor, that’s my prediction.

But that won’t matter at all to the litany of lawsuits expected to come down the pike against those accused of rigging the rate:

Lawsuits are mounting against some of the world’s biggest banks over the ma­nipu­la­tion of the global interest rate known as Libor as smaller lenders, municipalities and investors take stock of losses tied to the widening scandal.

The cases are believed to be a trickle before an oncoming deluge of civil litigation that will beset the world’s largest banks for years. Yet the ultimate problem for the accused may not be the millions they pay in damages but rather the cloud of uncertainty looming over their business.

Already there is talk of the government stepping in to oversee a global settlement, just as it did in the mortgage robo-signing scandal. But it took years for regulators to reach a nationwide mortgage settlement. And that settlement involved the cooperation only of states, not countries, which means the banking industry could be mired in legal action for a while.

The talk of a global settlement, as near as I can tell, is coming from the banks themselves and basically nobody else. I wouldn’t put anything past the government, especially if the banks whine that lending will suffer as a result, basically putting a gun to the head of the economy. But there are probably too many steers to corral here. You have municipalities, derivatives traders, loan holders, virtually anyone who purchased a product where Libor was used to set the interest rate. The civil litigation will carry on for years.