* JP Morgan says to exit BBSW panel at end March
* UBS quit panel in February after hefty Libor fine
* UBS internal probe found evidence of misconduct on BBSW
* AFMA says BBSW less risky than other rate setting methods
By Lincoln Feast
SYDNEY, March 8 JPMorgan Chase & Co is
pulling out of the panel that sets Australia's benchmark
interbank lending rates, joining UBS in an exodus from
regional rate setting panels in the wake of the Libor rate
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 (Libor).
The panel that sets Australia's bank bill swap (BBSW)
reference rate, administered by the Australian Financial Markets
Association (AFMA), will drop to 12 from 14 with the impending
departure of JP Morgan.
"We have advised AFMA that we will be withdrawing," a JP
Morgan spokesman told Reuters, adding that the move would take
effect from the end of March.
JPMorgan gave no explanation for its exit from the BBSW rate
UBS stopped participating in the BBSW panel in February. The
Swiss bank's move followed the publication of a Commodities
Futures Trading Commission report into its manipulation of Libor
and its Japanese yen equivalent.
The CFTC findings, reported by Reuters in January, noted
attempted manipulation by UBS traders in the BBSW, among others.
"Through its internal investigation, UBS identified evidence
of similar misconduct involving submissions for at least the
Hong Kong Interbank Offered Rate ("HIBOR"), the Singapore
Interbank Offered Rate ("SIBOR"), the Singapore Swap Offer Rate
("SOR") and the Australian Bank Bill Swap Rate ("BBSW")," a
footnote in the CFTC charge sheet read.
UBS, which agreed in December to pay regulators $1.5 billion
for its role in the Libor scandal, said the withdrawal from BBSW
was part of a global move to reduce its involvement on regional
rate setting panels. A spokeswoman for Swiss bank declined to
comment on its internal investigation relating to BBSW.
JPMorgan is also reviewing its involvement in other smaller
regional interbank rate setting panels. There is no suggestion
or evidence its traders were involved in efforts to manipulate
AFMA said it had not been provided any details of UBS's
internal investigation into attempted manipulation of BBSW but
remained confident in the system, which unlike Libor is based on
traded prices rather than estimates.
"We have a range of checks and balances in place which would
make it extremely difficult to manipulate (BBSW) through the
submissions process," AFMA executive director David Lynch said.
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
panellists. The six middle submissions set the rate.
"AFMA's analysis has shown that included BBSW submissions
fall within a 1 basis point spread 98 percent of the time,"
AFMA is in talks with reserve members about joining the
panel and can operate with less than 14 members, he said,
declining to comment on the minimum number required.
UBS and JP Morgan are not alone in cutting their
participation in rate-setting panels.
In January, Dutch lender Rabobank pulled out of the panel
for Euribor, following a lead set by Citi which stopped
contributing rates for the European money market benchmark last
In Asia, RBS has pulled out from interbank panels in
Singapore, Hong Kong and Tokyo.