MONEY MARKETS-One-mth dlr Libor rates up on year-end stress

* One-month dollar Libor rate rises on year-end strain

* BOJ to hold emergency meeting on Tuesday

(Updates with BBA's Libor fixing, changes byline, previous SINGAPORE)

By Ian Chua

LONDON, Dec 1 (Reuters) - Signs of year-end funding stress in the bank-to-bank money market remained evident on Monday with one-month London interbank offered rates (Libor) for dollar funds drifting to a near one-month high.

European banks also continued to show their preference for hoarding cash rather than lend it out in the interbank market.

Latest data revealed European banks deposited 203.889 billion euros at the European Central Bank vault overnight as of Nov. 30. While the figure was down from Friday, the amount was still nearly a quarter of the 790.486 billion euros the ECB has outstanding in open market operations.

The one-month dollar Libor USD1MFSR= was fixed at 1.91 percent on Monday -- the highest in nearly a month -- while the corresponding rate for sterling GBP1MFSR= also rose.

See [ID:nL1582287] for latest Libor fixings.

Three-month Libor spreads over anticipated central bank rates for dollar and euro narrowed slightly, but stayed elevated, while the sterling spread widened.

The spreads are seen as a gauge of banks' willingness to lend to each other -- a wider spread suggests less inclination to lend.

Christoph Rieger, strategist at Dresdner Kleinwort in Frankfurt said despite central bank action, the spreads have not contracted much and have in fact showed a tendency to widen.

"Conditions are difficult over year-end and they won't improve before that," he said, but added the spreads should contract and Libor fixings are likely to fall in the New Year.

"Depending also on what the ECB and other central banks do, things should improve thereafter."

Official interest rates in Europe are expected to fall further this week, with both the ECB and Bank of England seen cutting borrowing costs by at least 50 basis points.

"Central banks will aggressively supply reserves right up till the end and the commercial banks will hoard those reserves right up till the end and then the bottom will drop off and rates will plummet," said John Richards, head of Asia-Pacific research at RBS Securities in Tokyo.

"But you can expect a significant amount of hoarding of reserves and therefore the appearance of money market conditions continuing to tighten and central banks doing everything they can to offset that."

Last Friday, a report from the ECB said European Union banks must dramatically improve back-up plans for coping with unexpected liquidity shortfalls and that they must set aside the stigma of tapping central bank facilities in times of liquidity problems.

MORE HELP

Italy was the latest country to support its banks, offering up to $15.5 billion to the sector on Friday but economists said details were too vague to really help and the amount is dwarfed by the funds on tap from other governments.

Concrete measures for banks taken elsewhere already surpass Italy's offer, with the United Kingdom paying 15 billion pounds ($23.1 billion) alone on Friday to take a 58 percent stake in Royal Bank of Scotland (RBS.L), the latest in a series of interventions [ID:nLS224525].

Meanwhile, the Bank of Japan said it would hold an emergency policy meeting on Tuesday as Governor Masaaki Shirakawa warned Japanese companies' funding conditions were worsening at a rapid pace that matched Japan's credit crunch a decade ago.

Shirakawa also offered his weakest economic assessment to date in his speech, and many analysts said he was ready to take action to ease credit markets, but they did not see an interest rate cut as imminent. [ID:nT221681] (Additional reporting by Vidya Ranganathan in SINGAPORE; Editing by Toby Chopra)