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* Gensler says Libor change won't happen overnight
* Bankers say transition to a new Libor will take years
* Wheatley hints other benchmarks may need administrators (Recasts with CFTC chairman Gensler, banker comment)
By Huw Jones
LONDON, Sept 19 (Reuters) - A top U.S. regulator stepped back from previous calls to scrap the Libor interbank lending rate, saying instead that reform needed to be led at a global level and would take time.
Gary Gensler, chairman of the Commodity Futures Trading Commission, has said in the past that the London Interbank Offered Rate - which is set daily by the banks themselves and has been the subject of a major rate-rigging scandal - should be abandoned straight away. Those comments sparked worry about market upheavals: Libor prices over $300 trillion in products globally, from home loans to credit cards.
Gensler struck a more conciliatory tone on Thursday and welcomed reforms Britain has put in place to tighten how Libor is run, which include appointing NYSE Euronext as an independent administrator.
The UK introduced new rules last year governing the setting of Libor. Now banks' borrowing quotes will require documentation and an independent administrator to oversee transactions rather than the British Bankers' Association.
Gensler also dismissed talk that the United States would insist on a Libor replacement being based on American soil rather than staying in London.
The Financial Stability Board, the regulatory arm of the Group of 20 leading economies (G20) will report next June on how a reformed Libor could be based on transactions, and how this model could be introduced without market disruption.
"I think this is housed appropriately now at the Financial Stability Board. I think it needs to be global," Gensler said on the sidelines of an International Swaps and Derivatives Association conference.
"I think the international community through the Financial Stability Board will find solutions. It doesn't mean that it will happen overnight," he added. "I don't think you can address reform just through governance of Libor. The mother of all interest rates is rigged. How can the public have confidence in that?"
Martin Wheatley, chief executive of Britain's Financial Conduct Authority and co-chair of the FSB working group to reform Libor, suggested the new rules governing rates and prices may have to be applied across other markets too.
"Restoring confidence and trust is not simply about Libor ... it's by no means the only one capable of knocking market confidence," Wheatley told the same conference. "Do we hold all benchmarks to the same broad standards, or do we allow the reputation of some to climb, others to fall?"
"The danger with the latter option, I think, is that you risk the integrity of an entire system," he added.
Administrators will be given a year to get the new Libor rules in place. Then, Wheatley said: "We'll look again at the principles. We'll also take a position on whether they can be improved or made more effective."
The European Commission published a draft law to regulate benchmarks at the European level for the first time on Wednesday.
It rowed back from earlier plans for supervision of major benchmarks like Libor by the Paris-based European Securities and Markets Authority rather than by the FCA in London.
"This was a positive document...and it's encouraging to see the Commission using Libor reform as a broad template for benchmark regulation," Wheatley said.
The EU draft law says benchmarks should be based on market transactions where possible but that "judgment" should be allowed in difficult markets.
Reporting by Huw Jones; Editing by Sophie Walker