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UBS Quits Euribor Amid Bank Exodus From Rate-Setting Panels

UBS Quits Euribor Amid Banks’ Exodus From Rate-Setting Panels
UBS was fined about 1.4 billion francs in December by regulators in the U.S., U.K. and Switzerland for altering submissions to benchmarks such as Libor. Photographer: Gianluca Colla/Bloomberg

March 19 (Bloomberg) -- UBS AG, Switzerland’s biggest bank, plans to pull out of a panel setting Euribor rates, following an exodus of lenders including Citigroup Inc. and Rabobank Groep in the wake of scandals involving interest-rate benchmarks.

UBS is withdrawing its involvement with the euro interbank offered rate, a benchmark for trillions of euros in lending, as it exits most debt-trading businesses and focuses on funding itself in dollars and Swiss francs, Serge Steiner, a spokesman for the Zurich-based bank, said by e-mail today.

Membership of panels setting benchmarks such as Euribor and the London interbank offered rate has become potentially expensive as regulators consider litigation, fines and criminal penalties in response to misbehavior. UBS was fined about 1.4 billion francs ($1.5 billion) in December by regulators in the U.S., U.K. and Switzerland for altering submissions to benchmarks such as Libor.

UBS will cease to contribute to Euribor by the end of March, Euribor-EBF Director Cedric Quemener said by e-mail today. The Brussels-based European banking group administers benchmarks including Euribor. Paris-based L’Agefi reported the news earlier.

Svenska Handelsbanken AB will leave the panel as of March 20, Euribor-EBF said on its website today.

Europe’s top financial regulator, Michel Barnier, said last month that he’s considering forcing lenders to participate in setting rates including Euribor. The benchmark is derived from a daily survey of lending quotes conducted for Euribor-EBF by Thomson Reuters Corp.

Dropping Out

Regulators will draw up a list of lenders that should be forced to participate in setting interbank rates “in view of their involvement” in those markets, Barnier, the European Union’s financial-services chief, said on Feb. 8.

The Euribor panel consists of 39 banks, including UBS, according to Euribor-EBF’s website. Since September, Raiffeisen Bank International AG, Rabobank, Bayerische Landesbank, DekaBank and Citigroup have withdrawn from Euribor, the group says.

UBS, Societe Generale SA and HSBC Holdings Plc are among banks that have dropped out of the setting of the Eurepo Index, which is also managed by Euribor-EBF.

UBS said in October it would trim risk-weighted assets by about 100 billion francs by the end of 2017 as it shrinks the fixed-income businesses of the investment bank. The bank will lower risk-weighted assets at the fixed-income unit by 80 billion francs from 110 billion francs. Of these, about 30 billion francs will come from credit businesses and 40 billion francs from rates, UBS said.

To contact the reporters on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net; Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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