Bloomberg News

Euribor Banks Willing to Revise Supervision, Banking Group Says

July 09, 2012

Banking groups that set the euro interbank lending rate are willing to revise supervision and volunteer full disclosure to authorities on how they calculate the rate, the European Banking Federation said.

Euribor-EBF, which produces the benchmark rate using information provided by banks, is “willing to take any step necessary to further ensure the transparency and accountability of the process,” the group said in a statement on its website today, adding that it “strongly condemns any attempt at manipulating the calculation of interbank rates.”

Brussels-based Euribor-EBF responded to revelations that banks deliberately lowballed submissions to Euribor at the request of derivatives traders by saying the rate was supposed to reflect cash lending and was “never meant to be used by derivatives market practitioners.” The organization’s members are national banking groups, including the British Banking Association.

Confidence in the euro and London interbank offered rates, benchmarks for trillions of dollars’ worth of financial products worldwide, has been dented following Barclays Plc (BARC)’s admission that it submitted false rates. Robert Diamond, who resigned as Barclays’s chief executive officer after the bank was fined 290 million pounds ($449.8 million), told British lawmakers last week that other banks also lowballed their Libor submissions.

The three-month Euribor dropped to an all-time low of 0.531 percent today, compared with 0.549 percent the previous session on July 6, the EBF said earlier.

45 Banks

While Euribor-EBF supports public oversight for the lending rate, the group says the exact conditions and nature of a supervisor would have to be carefully assessed. It said it volunteered full disclosure to authorities on the way the rate is calculated.

“We believe any actual manipulation of the rate would have been extremely difficult to achieve considering that the panel involves 45 banks which are based in different locations and operate very different activities,” said Euribor-EBF Chief Executive Guido Ravoet.

Euribor reflects the cost for each of the banks on the panel to borrow from others for various periods of time. The six highest and lowest contributions are stripped out from the daily calculations.

European Union antitrust regulators in October raided banks that offer financial derivatives linked to the Euribor rates, saying they were investigating possible collusion.

To contact the reporters on this story: Aoife White in Brussels at awhite62@bloomberg.net; Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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