Speaking at the release of the latest Financial Stability Report, King said the current LIBOR process would have to change following the revelation a number of banks had manipulated it to make additional profits.

King said: “The time has come to move LIBOR towards observations based on actual market transactions.”

Such a move would be a big step change away from the current system based on estimates.

King added the idea that “my word is my Libor” was now dead after Barclays was issued with a record £59.5m fine for trying to manipulate the London interbank offered rate. In total the bank had to pay £290m in fines from regulators in the UK and US, while other banks involved in the scam are currently under investigation.

King added: “We will make sure that the system, which was rigged in the favour of at least one and possibly several institutions, is fixed.”

Banks’ share prices have been hammered following the fine from the Financial Services Authority, with politicians now wading into the row and calling for bank bosses to be sacked.