UBS departure deals Euribor fresh blow

Tue Mar 19, 2013 1:08pm EDT
 
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By Katharina Bart and Marc Jones

ZURICH/LONDON (Reuters) - UBS UBSN.VX 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 unraveling 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 bank.

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 Euribor.

PRESSURE

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 key benchmarks.   Continued...

 
The logo of Swiss bank UBS is seen on a building in Zurich, February 13, 2013. REUTERS/Michael Buholzer