BoE governor urges reform of Libor Sir Mervyn King, governor of the Bank of England, said on Friday the Libor benchmark interest rate should be based on transactions, rather than the current system based on estimates. Sir Mervyn said the idea that "my word is my Libor" was now dead after Barclays was issued with a record fine for trying to manipulate the London interbank offered rate. Libor - the London interbank offered rate - is calculated using banks" estimates of the price they think they can borrow at. Sir Mervyn questioned why it was sensible to use a rate compiled from quotes - or even hypothetical estimates in a thin market - for so many other contracts. "We will make sure that the system, which was rigged in the favour of at least one and possibly several institutions, is fixed," he said. Speaking at a press conference on the financial stability report, the governor called for a change in the culture of the banking industry, saying something had gone "very wrong." He said the situation required a "leadership of an unusually high order and changes to the structure of the industry," but ruled out a Leveson-style inquiry into British banking, which some politicians have been calling for. Sir Mervyn urged the government to enact the Vickers plan - to separate investment and retail banking - as soon as possible. Adair Turner, chairman of the Financial Services Authority, said he was shocked by the "degree of cynicism and greed" in the Barclays traders" emails, sent as they were trying to fix the rate. He added that people were "fooling" themselves if they thought such a view was restricted to the Libor case and that similar attitudes could be found in other areas. Politicians from all sides strongly condemned the attempted manipulation of Libor on Thursday, with some calling for Bob Diamond, the bank's chief executive, to step down. Adding fuel to the fire was the FSA's report on British banks mis-selling interest rate swaps, published earlier on Friday. Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland have agreed to compensate small and medium-sized businesses that were mis-sold the swaps.