A minor but important issue in the midst of this financial storm.
Because Euribor may no longer be a true European interest rate.
It began as an average of inter-bank rates of 58 European banks, and is now reduced to only 44 banks. One of these days, when nearly all European banks lose access to the "money market", the Euribor interest rate will be limited to the average bid-offer from Deutsche Bank.
Having helped to introduce Lisbor back in 1992, one wonders whether the current EURIBOR arrangements have now become part of the problem, instead of the solution. When banks are routinely paying funding costs of interbank EURIBOR +3%, you have to question the EURIBOR as much as you question the banks.
Mariana Abrantes de Sousa
PPP Lusofonia
Even the French are now off TARGETSee also http://ppplusofonia.blogspot.com/search/label/Crise
Lisbor, Indexante para uma nova era, Revista Valor 1992
Banks, Central Banks and Moral Hazard in the Eurozone
An article in a Portuguese newspaper today says that Germany has saved €13B in funding costs thus far. http://economico.sapo.pt/noticias/alemanha-poupa-13-mil-milhoes-com-crise-do-euro_133023.html
It seems that there is no stopping the divergence of fortunes among the European countries. This divergence in gains and losses shows that we have a lot more to lose than the Single Currency.
Some made gains with the convergence of interest rates in the past, and now others are gaining from the divergence, which however goes well beyond actual market trends.
Because Euribor may no longer be a true European interest rate. It began as an average of inter-bank rates of 58 European banks, and is now reduced to only 44 banks. One of these days, when nearly all European banks lose access to the "money market", the Euribor interest rate will be limited to the average bid-offer from Deutsche Bank.
Having helped to introduce Lisbor back in 1992, one wonders whether the current EURIBOR arrangements have now become part of the problem, instead of the solution. When banks are routinely paying funding costs of interbank EURIBOR +3%, you have to question the EURIBOR as much as you question the banks.
Mariana Abrantes de Sousa
PPP Lusofonia
Even the French are now off TARGET
Lisbor, Indexante para uma nova era, Revista Valor 1992
Banks, Central Banks and Moral Hazard in the Eurozone
Considering the importance of Libor and Euribor as reference rates in so many contracts, it is not surprising that it can be abused.
ResponderEliminarThis may a good time to take a good look at Euribor, the inter-bank rate of "prime banks" operating in Europe. Originally set by 59 banks, it is now down to only 43 banks, including 10 German banks. Presumably, the other 16 banks which have been excluded are loosing money on their long-term Euribor-indexed contracts.
Thus, Euribor has become less representative of the true inter-bank costs in the Eurozone, causing distortions and becoming part of the problem in European banking.
Considering the importance of the EURIBOR benchmark which is used in financial transactions in the European Union and beyond, I would be grateful for the following information:
ResponderEliminar1. How many reporting commercial banks are included in the EURIBOR panel currently in 2013 , and at the end of each of the previous years since 2000, and what percentage of the retail/consumer deposits in the Eurozone do they represent?
2. Is he current EURIBOR panel of banks more or less representative of the retail commercial banking system of the Eurozone than in 2000?
3. Does the Euribor Steering Committtee include any retail, consumer and non-reporting commercial banks representatives?
4. What safeguards are in place to insure that the EURIBOR benchmarks reflect the true Eurozone inter-bank market averages, and not just the so-called "prime banks", in the current context of accentuated polarization and divergence of fortunates among the net creditor and net debtor countries in the Eurozone?