NEW YORK/WASHINGTON (Reuters) - Financial markets need to consider the risks of relying heavily on the dollar-based London Interbank Offer Rate because this reference rate could stop being published, Federal Reserve Governor Jerome Powell said on Tuesday as a Fed-convened committee continued to zero in on an alternative to the so-called Libor.

"Market participants are not used to thinking about this possibility, but benchmarks sometimes come to a halt," Powell said in prepared remarks in New York for a roundtable discussion on a report on alternative reference rates.

Libor is one of the world's most important benchmarks and about $300 trillion in contracts reference it. But Libor has come under scrutiny since traders at several large banks were accused of rigging its daily rates.

That scrutiny has led to requirements that banks base their submissions for Libor rates on actual market trades, which Powell said was made difficult by a long-term decline in the money market borrowing that underlies U.S. dollar Libor submissions.

"It is difficult to ask banks to submit rates at which they believe they could borrow on a daily basis if they do not actually borrow very often," Powell said.

He was speaking at a roundtable of the Alternative Reference Rates Committee, which was convened by the U.S. central bank and which published an interim report on Tuesday. Last month, the committee narrowed down the Libor alternatives to two possibilities: the Overnight Bank Funding Rate and some form of an overnight Treasury general collateral repurchase agreement rate, or GC repo.

These two, the committee said, are more firmly based on trades from "a robust underlying market" and they comply with the latest international standards.

ARRC includes 15 big banks, which are also interest rate derivatives dealers along with the Fed, the U.S. Treasury Department, the Commodity Futures Trading Commission and the New York Fed. Clearing houses such as Bank of New York Mellon, CME and LCH.Clearnet are also part of the group.

The committee began work in November 2014 and parallels projects by authorities in Britain, Japan, Switzerland and the euro zone.

(Reporting by Jason Lange in Washington and Jonathan Spicer in New York; Editing by Diane Craft)