* UBS departure raises fresh worries about Euribor
* Move follows UBS fines for fixing, investment banking
* Banks discussing overhaul of Euribor
By Katharina Bart and Marc Jones
ZURICH/LONDON March 19 UBS become the
latest big name European bank to stop contributing to money
market benchmark Euribor on Tuesday, dealing the credibility of
the scandal-tainted lending rate a fresh blow.
UBS, which was fined $1.5 billion euros in December for
manipulating bank lending rates, said it was pulling out of
Euribor as of March 28 as part of plans to focus on its Swiss
franc and dollar funding markets.
Euribor and its larger counterpart Libor are
Europe's benchmark gauges of how much banks pay to borrow from
peers, but its future has been called into question by pull-outs
and an inquiry into Libor-style manipulation.
Trillions of euros worth of financial products, from home
mortgages to complex financial derivatives, are priced using
Euribor and a complete unravelling of the rate would cause a
major headache for the banking system.
"We have decided to withdraw from the Euribor panel and to
focus on our core funding markets, Swiss franc and U.S. dollar,"
a UBS spokesman said, adding the decision was linked to an
October decision to shut down major parts of its investment
The Swiss bank's departure follows Rabobank's in January and
Citi's last year, and leaves few top name banks in the near
40-member group that provides the daily contributions to
The decision also defies recent calls from European
authorities, including the European Central Bank (ECB) and the
Bank of International Settlements (BIS), for banks to remain in
Although they have put pressure on banks to remain in the
Euribor calculations, ECB officials acknowledge that they can
not force them unless it is made a legal obligation.
As banks look to protect or repair reputations, they are
questioning the appeal of being involved in setting interbank
The Libor scandal toppled the leadership of Barclay's last
year and has generated billions in fines. With the European
Commission expected to publish the findings of its investigation
into Euribor later in the year, the worry is that more
wrongdoings could be uncovered.
On Monday, top money market bankers met at the ECB's
Frankfurt headquarters and discussed plans to base Euribor, at
least partly, on transactions rather than the estimates used at
Euribor-EBF, the small Brussels-based group that runs the
benchmark, could not be reached for comment on UBS's decision to
It too has identified transaction-based rates as a key
improvement and back in December voiced concerns over banks
withdrawing from the lending rate.