(Refiles to add dropped words "on behalf of the British Bankers
Association (BBA)" in final paragraph)
* Probe into Euribor, Libor rate-setting continues
* Euribor-EBF says banks worried about staying on
* Euribor-EBF chief says banks quitting sends wrong signal
By John O'Donnell
BRUSSELS, Dec 5 The group running lending rate
benchmark Euribor warned on Wednesday that nervous banks could
quit the panels that contribute to setting such rates,
undermining the systems used to fix the price of lending.
Euribor, the euro interbank offered rate, and Libor, are the
key gauges of how much banks pay to borrow from peers and
underpin swathes of financial products from Spanish mortgages to
derivatives contracts sealed in London. Both are set using
interbank borrowing rates submitted by banks on the panels.
The statement signalled a heightened sense of alarm over the
future of such benchmarks as authorities continued to
investigate possible manipulation of the London interbank
offered rate (Libor) and its smaller euro counterpart, Euribor.
"Banks' responsibility in setting benchmarks is part of
their core role as market participants," said Guido Ravoet,
Chief Executive of Euribor-EBF, an arm of the European Banking
Federation that runs Euribor.
"Withdrawing from the benchmark setting process would send
the wrong signal," he said in a joint statement with ACI The
Financial Markets Association, a body representing financial
Citigroup, one of the world's biggest banks and a
major player in European money markets, left the Euribor panel
in September, citing "low interbank transaction volumes in the
euro zone". More than 40 banks remain on the panel.
Citigroup had said last year it received information
requests from investigators looking into interbank offered
In the statement the two groups said some banks had
expressed reservations about participating in benchmark setting
and warned that any withdrawal had the potential to undermine
confidence in the system.
The plea comes as a collapse in interbank lending and the
threat of a regulatory clampdown are putting pressure on such
benchmarks to change the way rates are determined.
In September the EU's executive Commission opened talks with
the industry about possible curbs on such benchmarks that could
lay down stricter rules on how the rate for Euribor is
established, as well as enforcing new public supervision.
It is also considering rules to change the way such
benchmarks are calculated, as well as imposing tougher legal
penalties on those who try to manipulate them.
Adding to this pressure, Joaquin Almunia, the European
Union's anti-trust chief, is investigating Euribor, Libor and
other benchmarks for possible breaches of the EU cartel rules.
Last month sources familiar with the matter said that a
group representing some of the world's most powerful banks
approached the European Central Bank to seek backing for a new
way to calculate the cost of funding after the Libor rigging
Reuters parent company Thomson Reuters Corp
collects information from banks and uses it to calculate Libor
rates on behalf of the British Bankers Association (BBA). It
also computes Euribor.