The ICAEW is developing guidance on conducting external audits of banks' interest rate estimates in a bid to restore confidence in Libor following the recent rate fixing scandal.

Such audits were first mooted in the US in 2008 by the New York Federal Reserve and could soon become compulsory under regulations being considered in the UK following the scandal that forced Barclays chief Bob Diamond and a series of other senior figures to resign.

But regulators are adamant that rate-rigging went far beyond Barclays and are already conducting a series of probes into the some of the world's biggest banks.

The US Commodities and Futures Trading Commission (CFTC) compelled Barclays to engage auditors to independently check its Libor submissions over a four-year period, kicking off in June 2013. State-owned RBS is also tipped to make a settlement, with a requirement to accept similar audits.

Banks not subject to such settlements may decide to obtain assurance to promote public confidence in their own submissions.

Iain Coke, head of ICAEW's Financial Services Faculty, said: 'External assurance may become a feature of restoring trust in interest rate benchmarks. Developing guidance under international standards will add consistency and credibility to this assurance.

'This will take some time to develop, so ICAEW is looking to stay ahead of possible regulatory outcomes so that this change is available to be implemented quickly.'

The institute says it aims to issue an exposure draft of guidance by the end of 2012. This will be developed by a working party, chaired by Mike Lloyd, bank audit partner at Deloitte.

It will seek views from a range of stakeholders in developing this guidance, including regulators such as the CFTC and Financial Services Authority (FSA).

A number of reviews are already underway across the world, including the Wheatley Review in the UK. The ICAEW said that while these outcomes have yet to be determined, external assurance is likely to be one of the options available to regulators and benchmark setters.

The Libor rate is currently calculated from banks' own estimates of their borrowing costs, without outside verification.