UPDATE 2-European heavyweight Rabobank quits Euribor

Fri Jan 4, 2013 10:35am EST

* Rabobank, BayernLB become latest banks to quit Euribor

* Austria's Raiffeisen says it is considering its future

* Rabo says no plans to quit Libor

By Thomas Escritt and Marc Jones

AMSTERDAM/LONDON, Jan 4 (Reuters) - Rabobank became the highest profile European bank to quit money market benchmark Euribor on Friday, dealing the credibility of the lending rate a fresh blow as its future remains uncertain.

The Dutch cooperative, one of Europe's highest-rated banks, confirmed it had quit the more-than 40-strong Euribor panel after data showed it did not submit a contribution on Friday.

"The changed circumstances on the money market have strongly affected Rabobank's business," it said in a statement given to Reuters. "As a result, Rabobank evaluated its contribution to the Euribor panel from a business economics point of view."

There was a second blow as German Landesbank BayernLB said it had also withdrawn from Euribor, effective from the start of 2013, for "strategic reasons".

Euribor and its larger counterpart Libor are Europe's key gauges of how much banks pay to borrow from their peers, and underpin swathes of financial products. But their future is in doubt after it emerged last year that a number of banks had manipulated the benchmarks for their own advantage in the past.

The Libor scandal toppled the leadership of Britain's Barclays and cost UBS $1.5 billion in fines last year. Other banks are also bracing for huge fines and the possibility of criminal charges against bankers and executives.

Rabobank's is the highest-profile European departure from Euribor to date and comes after Citi, one of the world's biggest financial institutions, and Germany's Dekabank quit last year.

NO LIBOR EXIT

As banks look to protect their still-hurting reputations, the appeal of being involved in setting interbank rates is being increasingly questioned. If too many banks pull out, Euribor and Libor could unravel completely.

A spokesman for Rabobank said it had no current plans to withdraw from Libor but Austria's Raiffeisen Bank International said it was considering its future in Euribor. "We are evaluating that", said a spokesman.

Rabobank has already been touched by the rate-setting scandal. It fired a number of traders over manipulation claims between 2008 and 2011, according to one Dutch newspaper.

Some of its former employees were also suspended by Bank of Tokyo-Mitsubishi UFJ last year in connection with a probe by UK authorities into the rigging of interbank lending rates.

The European Commision is due to publish a review of Euribor in coming weeks as authorities in Europe demand greater transparency in the setting of interbank lending rates.

Late last year the European Central Bank called Euribor organisers, Euribor-EBF, to improve the credibility of the benchmark by calculating it from actual bank-to-bank trades rather than banks' estimates of what they pay to borrow.

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