Libor, a daily rate in a range of currencies, is based on submissions from banks of interest rates they believe they would be charged by others for borrowing money.

Around 6 trillion Swiss francs ($6.20 trillion) worth of contracts use Libor as a benchmark, making it by far the most important interest rate for the Swiss economy.

But the measure is on the way out after banks were fined billions of dollars for trying to manipulate it. Turnover in the unsecured money market, the basis for Libor, also has decreased to record low levels for all currencies, Moser said.

"Despite all the measures that have been taken, it seems impossible to re-establish the Libor as a credible, robust and resilient benchmark," Moser said in remarks prepared for a conference in Zurich on Friday.

The SNB conducts monetary policy by steering interest rates in the Swiss franc money market, telling the market in what range it intends to keep three-month Swiss franc Libor.

The target range is one of the three elements of the SNB's monetary policy strategy, along with its definition of price stability and the conditional inflation forecast, Moser said.

"Central banks are capable of controlling the level of short-term interest rates in a variety of ways," he said. "In particular, the policy stance is not tied to the existence of a specific reference rate. This is also the case for the SNB.

"Thus, a discontinuation of the Libor would neither affect

our monetary policy stance nor our ability to ensure price stability."

The SNB is looking at alternative benchmarks, including SARON, the Swiss Average Rate Overnight for secured loans. The central bank would continue to support market participants in the rate benchmark transition process, Moser said.

"But in the end, market participants themselves are responsible for choosing alternative rates and ensuring a timely transition," he said.

($1 = 0.9685 Swiss francs)

(Reporting by John Revill)

By John Revill