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Raiffeisen Quitting Euribor After EBF Warns of Member Exodus

January 09, 2013

Raiffeisen Quits Euribor After EBF Warns of Contributor Exodus

Raiffeisen Bank International AG is leaving the panel of lenders that sets Euribor. Photographer: Akos Stiller/Bloomberg

Raiffeisen Bank International AG (RBI) of Austria said it’s leaving the panel of lenders that sets Euribor, a day after the lobby group that administers the scandal-hit benchmark warned it risks an exodus of contributors.

Raiffeisen’s interbank lending business has become “less meaningful” and it no longer makes sense for the Vienna-based firm to take part, spokeswoman Jacqueline Kaye said in a phone interview. Its last submission to Euribor will be on Jan. 15.

Euribor-EBF, the Brussels-based lobby group that’s tied to the European Banking Federation, said the benchmark for trillion of euros of lending may face further departures after Rabobank Groep left the panel on Jan. 3. Membership has become potentially costly with the risk of litigation, fines and criminal penalties as authorities around the world conduct investigations into rate manipulation.

“Banks are asking themselves, do we want to be associated with something that no-one feels they have 100 percent confidence in?” said Christopher Wheeler, a bank analyst at Mediobanca SpA in London. “The last thing they want to do is put their heads above the parapet. The fact that Raiffeisen has stepped back is indicative of a cautious approach.”

The euro interbank offered rate is derived from a daily survey of lending quotes conducted for Euribor-EBF by Thomson Reuters Corp. Three-month Euribor, which tracks bank-loan rates over that maturity, was little changed at 0.192 percent today, down from 1.276 percent a year ago.

Manipulation Probes

Global authorities are investigating whether more than a dozen lenders altered submissions to benchmarks to profit from bets on derivatives or make their finances seem healthier.

The European Commission sought views last year on how to overhaul the governance and setting of Euribor, Libor and other market benchmarks in the wake of the scandal that has engulfed interbank lending rates.

The Commission, the executive arm of the 27-nation European Union, will come forward with draft legislation later this year, said Stefaan De Rynck, a spokesman for Michel Barnier, the EU’s financial services chief.

“The interbank business, including interbank lending, has become less significant, or less meaningful, for the bank,” Raiffeisen’s Kaye said. “It makes less sense for the bank to contribute. Raiffeisen will remain focused on its customer business.”

‘Contagion Risk’

Cedric Quemener, the director of Euribor-EBF, which is responsible for the benchmark, declined to comment on Raiffeisen’s exit from the 40-strong panel that sets the base rate for euro loans.

Earlier in the week, Quemener warned of “contagion risk” after Rabobank left the contributor panel. Rabobank’s departure followed the exit of Bayerische Landesbank, Germany’s second- biggest state-owned lender, which said it withdrew on Jan. 1 for “business-strategic reasons.”

Erste Group Bank AG (EBS), Austria’s biggest lender, said it’ll decide about its Euribor membership once authorities have finished reviews of the benchmark and clarified future requirements for contributions.

Raiffeisen is Austria’s third-biggest bank and has a market capitalization of 6.4 billion euros ($8.4 billion), according to data compiled by Bloomberg. The bank is rated A2 by Moody’s Investors Service, its sixth-highest investment grade, and an equivalent A by Standard & Poor’s and Fitch Ratings.

Banks have less need for interbank lending since the European Central Bank injected more than 1 trillion euros of cheap loans into the region’s financial system. The volume of overnight interbank lending was 16 billion euros yesterday compared with a daily average of 25 billion euros last year and 33 billion euros in 2011, EBF data shows.

“The ECB has essentially replaced some of the interbank market,” said Simon Adamson, an analyst with CreditSights Ltd. in London. “There are a number of particularly medium-sized banks that are probably much less active than they used to be in the interbank lending market. They’re not in a very strong position to put bids in reflecting where borrowing costs are.”

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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