Banks were fined billions of dollars for trying to rig Libor - the London Interbank Offered Rate - which is used to price trillions of dollars of financial contracts from mortgages to credit cards globally.
Regulators want the financial services companies to switch to alternative benchmarks and ditch Libor by December 2021 in the finance industry's biggest change in decades.
"Sooner or later a benchmark based on such shaky foundations will collapse," Andrew Hauser, executive director for markets at the Bank of England told an online event held by the central bank.
Hauser said very few actual transactions now underpin Libor, making the benchmark effectively based on "informed guesswork."
Edwin Schooling Latter, head of markets policy at the Financial Conduct Authority, said that from the end of September banks will have to offer non-Libor loan alternatives, pegged, for example, to the BoE's base rate or its overnight Sonia rate.
"If you do choose Libor over the next six months, then your contract with your lender must include an arrangement to convert that to a non-Libor rate at the end of 2021 or before," Schooling Latter said.
From the end of March next year, banks will not offer new Libor-pegged loans, he said.
"You will need to be able to conduct all your new business without relying on Libor before the end of 2021," Schooling Latter said.
Barclays' Finance Director Tushar Morzaria, who chairs a financial industry working group looking at the scrapping of Libor, said banks will be ready to offer non-Libor alternatives to all borrowers from the end of the month.
"By the end of the first quarter of next year, as a lending matter, Libor should really be pretty much behind us," Morzaria said. "We are in very good shape there."
Bankers have also said that not all of their customers are likely to have adapted their IT systems for the switch.
(Reporting by Huw Jones. Editing by Jane Merriman)
By Huw Jones
