In a year rife with banking scandals, none quite rivaled the intrigue or magnitude of the alleged ma­nipu­la­tion of the global interest rate known as Libor.

London-based Barclays set off a firestorm in June when it admitted to scheming to rig the benchmark that affects everything from mortgage rates to municipal bonds to credit cards around the world. Nearly half of the bank’s C-suite resigned. Municipalities, pension systems and hedge funds filed a flurry of lawsuits. Government officials held hearings. Prosecutors the world over launched a series of probes.

It would stand to reason that under this cloud of suspicion lenders and securities firms would have backed away from Libor by now. They have not.

The continued use of the interest rate, even by the very institutions suing the 18 banks that help set Libor, illustrates the complexities of modern finance.

The world’s financial system might have become sophisticated and powerful, but it is still reliant on a narrow set of accepted standards. And, as it turns out, when one of those benchmarks is shown to be fundamentally flawed, the global system struggles to adapt.

The best the public can hope for is an improvement to the status quo, some analysts say.

“The reality about Libor is that it’s so broadly used on trillions of dollars of contracts that we can’t just decide to throw it out and start from scratch,” said Peter Shapiro, managing director of the Swap Financial Group. “It’s best to figure out how to make it better and less vulnerable to manipulation.”

No one knows precisely how widely the world uses Libor, officially called the London interbank offered rate. But most analysts estimate it determines rates for hundreds of trillions of dollars’ worth of derivatives as well as tens of trillions in lending to businesses and consumers from Madrid to Manhattan.

A panel of the world’s largest banks, including Bank of America, Citigroup, HSBC and JPMorgan Chase, submit data to set the daily Libor rate. That information is collected on behalf of the British Bankers’ Association by Thomson Reuters, which calculates the average rate at which the institutions would lend to each other. Banks then use that as a benchmark for the interest rates on all sorts of loans.

As the financial crisis was heating up, Barclays said it manipulated rates to increase profits and hide its failing financial health. Regulators suspect Barclays was part of a larger conspiracy.

Prosecutors on both sides of the Atlantic are investigating at least 16 of the banks involved in setting the rate. British police arrested three men Tuesday, including a former trader at UBS AG and Citigroup, in connection with the investigation. Switzerland’s largest lender, UBS, is reportedly nearing a $465 million settlement to resolve allegations regarding its role in the scandal.

A number of cities, including Baltimore, say the banks’ actions robbed them of millions of dollars in returns on their municipal bonds and filed lawsuits. But few, if any, have stopped using the rate.

That’s largely because the banks and financial firms, which help municipalities sell bonds or provide insurance in case of wild interest rate swings, haven’t stopped using Libor.

Even the U.S. Treasury Department has come under fire for continuing to use Libor for a variety of programs in the government’s bailout package, known as the Troubled Assets Relief Program. One of the agency’s nominees is being blocked by Republican senators over the issue.

In October, in a letter to the TARP’s watchdog, Treasury Assistant Secretary Timothy G. Massad, said that the agency did not have “the authority to change unilaterally” its use of Libor without conclusive evidence that the rate was currently being manipulated. Moreover, firms partnering with Treasury on its rescue funds would have to agree to any change, which could “result in a lower payment to the taxpayers,” he wrote.

Only a handful of traders stopped using Libor, beginning in 2008, as they observed a suspiciously wide difference in Libor and other similar rates.

Still, the majority of the financial industry continues to use Libor because its use is pervasive in the market, making it difficult to switch en masse, said Ira Jersey, an interest-rate strategist at Credit Suisse Group.

A council of U.S. regulators met this month at Treasury to discuss the global overhaul of Libor. British regulators have spearheaded the effort, issuing a 10-point plan in September.

Among the recommendations is anchoring Libor interest rates to real transactions, instead of rates at which panel banks believe they could borrow. The regulators also called for the creation of a governing body to manage Libor and restore confidence in the rate.

Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, supports these suggestions but would like reforms to go further.

“Whoever keeps track of [Libor] should be a registered entity,” he said. “We should have jurisdiction over that entity because we may want to audit them to make sure the benchmark is appropriate.”

Dina ElBoghdady contributed to this report.