Banks weighed up the reputational risks from an opaque benchmarking system at the centre of a global rate-rigging scandal as Royal Bank of Scotland pulled out of a Singapore panel setting interbank lending rates.
People at other banks also said they might seek to get out of the panels, which set daily rates such as the London interbank offered rate (Libor), a benchmark underlying anything from mortgages to complex derivatives.
Partaking in the panels was once deemed a prestigious task, but is now tainted with the suspicion of manipulation, particularly so for smaller, less liquid currencies.
"Any bank that wasn''t thinking about it would be foolish," said a person at one of the banks contributing to one of the London rate-setting panels.
"People are saying, hang on, what''s the value in this for me? Especially for those currencies which may not be trading in high volumes," said another. Both people asked not to be named because of the sensitive nature of the issue.
Dozens of such interbank rates are set in financial centres across the world for a range of currencies, and managed by their own organisations, though those in London and Brussels are by far the most influential. Rates set in Tokyo are known as Tibor, those in Hong Kong as Hibor, and those in Brussels as Euribor.
Reuters exclusively reported on Sunday that Barclays planned to pull out of the rate-setting panel for interbank lending in the United Arab Emirates. RBS has already exited panels in Tokyo and Hong Kong, the Financial Times reported earlier this month.
An investigation into manipulation of London interbank lending rates started late last year and seized headlines last month when Barclays paid a $453 million fine to settle with US and UK regulators over its role in rate fixing.
More than a dozen other banks are involved in the probe, which has thrown the spotlight on the discredited process for setting the rates that are the basis for hundreds of trillions worth of financial contracts.
Bank of America and RBS on Monday did not appear on a daily page published by Thomson Reuters that lists contributors to Singapore''s US dollar and local currency interbank lending rates, also known as Sibor.
"During the course of this review, we have decided to end our contribution to the rate setting panels for Sibor in Singapore," said RBS Spokeswoman Patricia Choo. BofA declined to comment on its contribution to Sibor.
In London, the British Banking Association oversees 10 different Libor rates. The BBA panels for the Swedish krona and Danish krone each have only six members - Barclays, Deutsche Bank, HSBC, J. P Morgan, Lloyds and RBS. The BBA declined comment. The London rates are obtained by asking the banks at which level they expect they can borrow from other banks. That became a problem when banks stopped lending money to each other in the credit crisis, but continued to provide quotes.
"What has emerged from this in terms of policy suggestions is that any rate which is based on estimates rather than actual financial transactions is highly dubious," said Justin O''Brien, director of the centre for law, markets and regulation at the University of New South Wales in Sydney.
There are interest rate benchmarks based on lending between banks that work differently, though as yet there is no obvious successor to rates such as Libor, which have found their way into thousands of legal contracts.
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