Libor and collusion - what is the alternative

Reports are that regulators are looking into the rate benchmarks around the world for bank collusion.   It  is likely that they will find it.

The LIBOR issue is determining how to price or set benchmarks.  What is the estimated cost of borrowing versus what are the real costs from "trades" or the actually borrowing deals? LIBOR is determined by a daily poll through the BBA, a private institution. The poll asks banks what would be the cost of borrowing for different tenors and currencies. A number of extreme quotes are excluded and the remaining are averaged. Traders have asked the employees providing the poll information to tilt the rates. If there are fewer banks, the chance for collusion increases. Internal surveys increase the chance of collusion within the bank. The benefits of collusion increase with the size and use of these benchmarks.

There is a real problem here, but what happens if we do not have a benchmark? What can be done to eliminate this collusion issue? Should  the government set benchmarks? Asking for quotes creates the chance for gaming and there are few ways to eliminate incentives for collusion without strong enforcement.