LONDON: The European Central Bank put pressure on banks on Friday to stay in interbank lending benchmarks Euribor and Eonia, after a recent spate of high profile withdrawals which have put the future of the gauges in doubt.
"The ECB strongly encourages banks to remain in, join or re-join the reference rate panels in order to ensure an appropriate level of participation, so that the reference rates serve their purpose of adequately reflecting market developments," the ECB said in a statement.
Trillions of euros worth of financial products, from home mortgages to complex financial derivatives, are priced using Euribor and Eonia and a complete unravelling of the rates would be a major headache for the banking system.
LBBW and Helaba became the latest German lenders to pull out of Euribor this week after the recent departures of big name banks Rabobank, UBS and Citi.
The exodus has come as the credibility of the benchmarks has been called into question by an inquiry into Libor-style manipulation and the huge drop in lending during the financial crisis as bank-to-bank trust has crumbled.
The Libor scandal toppled the leadership of Barclays 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 wrongdoing could be uncovered.
Euribor-EBF, the organisation that runs the lending rates, had nobody available to comment on the ECB's support.
The Frankfurt-based central bank already helps calculate Eonia and has been working with Euribor-EBF on new rates based on transactions rather than the so-called 'estimates' that gave banks the room to manipulate them for their own advantage.
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