By Ryan Tracy

WASHINGTON--The Federal Reserve met with big banks and international regulators on Monday to discuss alternatives to the current London interbank offered rate, or Libor, in the wake of a rate-rigging scandal that has called the widely used benchmark into question.

Major Wall Street banks, as well as regulators from Europe and Japan, attended the meeting at the Federal Reserve Bank of New York. Fed Gov. Jerome Powell, who was expected to attend, said Monday the Fed's aim is to "start the process of choosing a risk-free rate" as an alternative to Libor.

"The point of Libor reform is to assure that Libor is actually grounded in real transactions rather than someone's judgment, which will make Libor much more difficult to manipulate," Mr. Powell said on CNBC.

Libor, the basis of interest rates on everything from corporate loans and derivatives to mortgage rates and credit cards, has come under scrutiny in the wake of a rate-rigging scandal that has ensnared major financial institutions across the globe. Bank employees are alleged to have manipulated interest rates to benefit their trading positions, and banks were accused of reporting artificially low rates in the financial crisis to conceal their problems. Seven banks and brokerages have settled with regulators over alleged manipulation, and some of their employees have been criminally charged.

Global regulators on the Financial Stability Board are also working to reform the way interest rates are set to make them less susceptible to fraud. In July, the FSB outlined its continuing work on potential alternative benchmarks. For rates in U.S. dollars, the choices in the FSB report included U.S. Treasury rates or the rates on certain types of repurchase agreements.

Monday's meeting included senior executives from 15 global financial firms, such as Goldman Sachs Group Inc. and Barclays PLC, and their regulators, such as the U.S. Commodity Futures Trading Commission and the European Central Bank.

Mr. Powell said the Fed hopes to push new derivatives contracts onto what he described as a "risk-free" rate over time.

"Reference rates are one of the foundations of the financial system. Certainly, it is in the interest of everyone, from the residential mortgage holder to the financial institutions that heavily use these rates, that they have integrity and be well constructed and resistant to manipulation," Mr. Powell added in a statement posted on the Fed's website.

The Fed said it is "interested in seeing market participants work toward alternative reference rates," and that it would also be consulting with "a wide group of market participants" as it looks into alternatives for use in U.S. dollar derivatives and other contracts.

Write to Ryan Tracy at ryan.tracy@wsj.com