The Euribor-EBF Association, made up of banks that help establish Euribor bank indicator should be reformed within six months, warned on Friday the regulation authorities of the EU financial market after it found flaws in its functioning. The European Banking Authority and the authority for financial instruments market were ready to withdraw Euribor (Euro Interbank Offered Rate) publishing rights to the Euribor-EBF organization, notes the U.S. newspaper Wall Street Journal. They recommended instead that the Euribor-EBF significantly extend the monitoring of data submitted by the contributing banks and the agent that uses these data to calculate the Euribor rate, ThomsonReuters PLC company.
Same as the indicator for the banking market in London, Libor, the Euribor reputation was affected by allegations that some banks would have manipulated the rate to maximize profits from transactions related to it. Euribor is used to calculate interest rates on loans and other financial contracts worth trillions of euros.
The two regulators demanded that in the future data submitted by banks to determine the index to be checked with transactions made by the banks. Also, Euribor-EBF should conduct periodic internal and external audits. In addition, banks that contribute data should not control the committee overseeing Euribor, suggested the two institutions.
The analysis is similar to that conducted by the chief of Financial Services Authority in the UK, Martin Wheatley, on Libor, an index with more extensive use globally. British government has accepted recommendations from the British Association of Banks to take responsibility for Libor and start criminal penalties for its manipulation. The report of the two European regulatory agencies of financial market will provide an assessment to the European Commission on how Euribor is administered and will help the EU executive to decide on the necessary legislation. The two agencies have authority to apply sanctions.
Euribor-EBF, the nonprofit organization operating Euribor, was established under Belgian law in 1999 with the launch of the euro, and is based in Brussels. The list of banks with significant European presence that contribute to Euribor includes Barclays, Commerzbank, Deutsche Bank, HSBC, ING, JPMorgan, Nordea, Societe Generale, BNP Paribas, Credit Agricole, UBS, Santander, Bank of Tokyo Mitsubishi, Intesa Sanpaolo and UniCredit .
The banks Raiffeisen Bank International, Bayerische Landesbank and Rabobank recently announced their departure from the group of credit institutions that help set the indicator. Also the Austrian group Erste Bank reported on Tuesday that it analyzes its options.
After the departure of the three financial institutions, the number of banks which contribute with data to determine Euribor reached 39. The maximum number of members, 44, was registered in 2012. Also last year Citigroup and DekaBank Group Germany stopped providing data for Euribor.
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