Citigroup to exit UAE interbank rate setting panel

ABU DHABI (Reuters): US lender Citigroup will leave the interbank interest rate setting panel in the United Arab Emirates on 25 June, reducing the size of the panel to 11 banks from 12, the central bank said on Monday.

The move will further increase the dominance of local banks over foreign banks in the panel that determines the Emirates interbank offered rate (Eibor), which is used to price financial instruments in the Gulf’s top banking centre.

A spokesman for Citi declined to comment on the reasons for its withdrawal when contacted by Reuters. The central bank said the exit was in line with Citi’s “globally implemented policy”.

Since last year’s scandal over manipulation of the London interbank offered rate (Libor), banks around the world have been considering withdrawing from panels which set indicative interbank rates, questioning the benefits of participation given the potential risks to their reputation.

Last year, Barclays agreed to pay a $ 453 million fine to US and British regulators over Libor manipulation, and last October it withdrew from the Eibor panel, though there was no suggestion that it tried to manipulate Eibor.

Barclays was replaced by UAE lender National Bank of Fujairah, but Citi will not be replaced. That will leave nine local and two foreign banks – HSBC and Standard Chartered – In the panel.

The central bank also said on Monday that the two-month Eibor tenor would be dropped from the panel’s fixings, effective on 10 December. Eibor rates run from one week to one year.