UPDATE 1-EU watchdogs see progress on reforming Euribor rates

Thu Feb 20, 2014 7:40am EST

By Huw Jones

LONDON Feb 20 (Reuters) - A European bank industry body has made substantial progress in shielding the Euribor interest rate benchmark from rigging by traders, two EU regulators on Thursday.

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) published guidelines a year ago as they sought to restore public confidence in Euribor, the Euro Interbank Offered Rate.

Several banks have been fined for manipulating Euribor and its bigger London counterpart Libor. Both rates are used to help price trillion of dollars worth of financial products from home loans to credit cards.

ESMA and EBA said that Brussels-based Euribor-EBF, the body that compiles the benchmark, had applied four of their recommendations in full and a further six in part.

"Euribor-EBF is on the right path," EBA Chairman Andrea Enria said in a statement.

"Its progress in terms of governance and conduct reflects a strong commitment to ensuring the quality of its benchmarks. I remain confident that the Euribor-EBF will soon complete its work, building on the continued support and commitment of panel banks," Enria added.

The guidelines from the watchdogs are an interim fix until the European Union passes a new law to regulate major financial benchmarks, although a significant vote on the law was delayed this week.

ESMA Chairman Steven Maijoor said Euribor should also be ready to respond to advances in international cooperation on reforming interbank benchmarks.

The watchdogs said Euribor compilation would have to be "brought in line" with any reform requirements from a global task force put together by the Financial Stability Board, which is due to report to leaders of the Group of 20 economies (G20) in November.

Reform of Euribor so far has focused on cutting the number of maturities and other different forms of Euribor from 15 to eight and putting in place a system of checks on the quotes from banks used to compile the benchmark.

Guido Ravoet, chief executive of Euribor-EBF, said the pace of reform was going according to plan but that the implementation of some recommendations would depend also on progress at the global level.

"Of course, rapid and further progress is essential," Ravoet said in a statement.

He said Euribor-EBF had also opened several new work streams in order to find alternative benchmarks based on real market transactions.

Regulators want market benchmarks to be based on actual transactions where possible, because they are more easily verified and less prone to manipulation than quotes.

Thomson Reuters compiles and publishes the daily Euribor figures for Euribor-EBF.

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