WRAPUP 1-BBA makes Libor changes; ICAP launches U.S. rate

NEW YORK/LONDON, June 10 (Reuters) - The group that sets the world's most widely tracked interest rates announced steps on Tuesday to boost confidence in its criticized benchmark rate while a big bond dealer launched an alternative measure of borrowing costs for banks with offices in the United States.

The British Bankers' Association said it would expand the number of contributors to its London interbank offered rates and would consider a second daily "fixing" of dollar Libor during U.S. market time. Currently, the rates are fixed, or published, each morning at about 6:45 a.m. EDT (1045 GMT).

The same day London-based broker ICAP (IAP.L: Quote, Profile, Research, Stock Buzz) said it would launch its own gauge of lending rates for banks with offices in the United States.

ICAP, which says it is the world's biggest middleman for the bond market, will publish results of its daily rate survey, called the New York Funding Rate, beginning Wednesday morning.

Some market participants had called for an alternative U.S. rate benchmark to Libor because Libor's reliability has been questioned during the current global credit crisis.

The market for short-term loans from one bank to another, that grew out of the U.S. real estate slump and the subsequent collapse of the risky subprime mortgage market, has been stressed.

Nearly a year into the global credit crunch, banks are still hesitant to lend to each other as huge losses suffered on soured mortgage investments have forced them to retain capital and as they distrust the financial health of counterparties.

Just on Tuesday, the interbank cost of borrowing three-month dollar funds posted its biggest rise since Aug. 9, the day the global financial crisis erupted, as banks grappled with the prospect of rising interest rates.

Market participants are likely to view the New York Funding Rate with some skepticism until its volume grows.