SYDNEY, March 28 Australia is scrapping the
panel that sets interbank lending rates after the proposal of
new international guidelines and an exodus of the banks that set
the rate in the wake of the Libor rate-rigging scandal.
The Australian Financial Markets Association (AFMA), which
administers Australia's bank bill swap (BBSW) reference rate,
said it would bypass the panel and derive the rates directly
from brokers and electronic markets.
"An advantage of this enhancement is that it will remove the
need for a BBSW Panel, which will eliminate the associated
compliance and ancillary costs which otherwise exist for
panellist banks," the AFMA said in a statement issued late on
"This change is subject to technical requirements being
satisfied, but it is hoped that this solution will be achievable
within a period of months."
Banks around the world are reviewing their involvement in
interest-rate setting panels after regulators dished out
billions of dollars in fines to banks, including Barclays
, UBS and Royal Bank of Scotland, for
manipulating the London Interbank Offered Rate, known as Libor.
Earlier this month, JP Morgan Chase & Co confirmed
it was pulling out of the BBSW, joining UBS, which left earlier
The Swiss bank's move followed the publication of a U.S.
Commodity Futures Trading Commission report into its
manipulation of Libor and its Japanese yen equivalent.
The AFMA said HSBC and Citibank were also
pulling out of the panel, meaning the panel will drop to 10
members from the end of March.
Submissions to the BBSW process report the prevailing prices
for a single type of clearly defined and homogeneously traded
paper from four "prime banks" and observed by up to 14
panelists. The six middle submissions set the rate.