United Arab Emirates lenders taking part in a panel setting the Emirates Interbank Offered Rates will have to give written reasons for their quotes, which will be used to calculate the rates under a new system, Reuters reported.
The Central Bank of the United Arab Emirates is expected to launch in mid-April a revised system of setting the EIBOR to reflect market conditions more accurately. The new system has reduced the panel of lenders to eight from 10, with each bank to justify their submissions, unlike the old method, "banking sources" told the newswire.
Lenders will be encouraged to base their submissions on a broader range of trades and counterparties than was previously the case, one source noted. This might nudge rates up slightly, given that the previous method would have relied mostly on trades for long-standing clients who were likelier to receive discounts, although the source added that quotes in recent weeks have in some cases had the new methodology baked in.
The highest and lowest quotes provided by the eight banks in the new panel will be discarded, before EIBOR rates are calculated by averaging the submissions, according to the Reuters report.