(Reuters)—An international accounting body is drawing up guidelines for conducting external audits of banks' interest rate estimates to restore confidence in the Libor benchmark after the revelation that bankers rigged figures.

Such audits were proposed four years ago by the United States and could become a requirement under regulations being considered in Britain after a scandal over the manipulation of the London Interbank Offered Rate caused havoc this year.

British bank Barclays P.L.C. was fined a record $450 million after it admitted manipulating its submissions used to calculate Libor, the basis for contracts worth hundreds of trillions of dollars across the global financial system.

Regulators believe the rate rigging went far beyond Barclays and are investigating most of the world's largest banks. Banks could also face huge potential litigation risks from parties that were hurt by illegal rate rigging.

Libor is calculated from banks' own estimates of their borrowing costs, without outside verification. Finding a way to reassure markets in future that the rates are sound is seen as a vital step in cleaning up the mess.

Under its settlement with regulators, Barclays will be required to hire auditors to verify its Libor submissions for four years, beginning in June 2013. The Royal Bank of Scotland P.L.C. is also widely believed to be close to a settlement, probably also requiring it accept audits.

The ICAEW, a global accounting body based in London, has started work on international guidance for such audits, which it hopes to have in place in time for the first Barclays audit next year, ICAEW head of financial services Iain Coke said.

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Mr. Coke said he believes other banks will probably either face a requirement in the future to have an external audit, or will introduce audits voluntarily to reassure markets and supervisors.

Guidance applied internationally would help make Libor more credible in the eyes of markets and users, he said. Still, drawing up such guidance will not be simple.

"There are lots of questions about what an external audit would entail," Mr. Coke said.

Libor consists of a "suite" of rates that banks estimate they would have to pay to borrow in different currencies over different periods of time. Since the rates are based on hypothetical transactions, it would be impossible to verify every submission by every bank for every rate.

Accountants would have to agree a reliable sampling method and standards, Mr. Coke said.

Barclays said it will comply with the terms of its settlement agreement with the U.S. Commodities Futures Trading Commission regulator. UK banks RBS, Lloyds TSB Bank P.L.C. and HSBC Holdings P.L.C. had no comment, nor did the CFTC.

Mr. Coke said an audit of Libor submissions would need to be separate from a bank's external audit of its financial statements. Even lenders not part of regulatory probes may want to use external auditors to check their submissions to give markets reassurance, he said.

Regulators are also looking at whether supervision of other benchmarks, such as oil prices, should be tightened up. Mr. Coke said the ICAEW's aim would be for its guidance to be broad enough to be applicable for audits of other benchmarks as well.

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Libor is overseen by the British Bankers' Association, a bank trade body, and compiled on the BBA's behalf by Thomson Reuters, parent company of Reuters, from data submitted daily by the banks.

Concerns about the credibility of Libor go back several years. U.S. Treasury Secretary Timothy Geithner recommended external audits of Libor figures to Bank of England Gov. Mervyn King in June 2008.

Such audits were one of several reforms Mr. Geithner proposed, including increasing the number of U.S. banks that make submissions, being more specific on the size of transactions banks referred to in their submissions, and reducing the number of quotes for longer-term and typically illiquid transactions.

Angela Knight, then chief executive of the BBA, said in 2008 that none of Mr. Geithner's recommendations would be impossible to implement, but external auditing was never introduced.

The BBA said that following its review of Libor in 2008 internal audits were started at banks from 2009. It had no comment on why external audits were left out.

Martin Wheatley, managing director of Britain's Financial Services Authority regulator, is reviewing Libor supervision and governance and has also included external auditing among ideas he is considering.

He will make recommendations on Sept. 28, some of which will be inserted into a wider financial law now being discussed in Britain's parliament for implementation next year.

The aim is to make Libor setting more rigorous, better supervised and less open to abuse, a move which could also make a costly mandatory external audit unnecessary. The FSA had no further comment on the review.