London: The European Central Bank called on Thursday for the creation of a new breed of bank-to-bank lending rates to compliment and eventually take over from scandal-tainted benchmarks such as Euribor and Libor.
In an article in the central bank's monthly report, the ECB reiterated its plea for banks to stay involved in interbank rate setting and for those who have recently quit as contributors to benchmarks to return while alternatives are constructed.
Doubts over the future of Euribor and its London counterpart Libor have been raised following a string of fixing scandals that have cost major banks billions of dollars in fines and lost some of their top executives their jobs.
"It is crucial that (the benchmarks') ...continuity is assured at all times, while more long-term reform solutions aimed at making reference rates such as Euribor more transaction-based are being assessed," the ECB said.
"Systemically important reference interest rates such as Euribor and Eonia are of particular importance in terms of credit provision to the euro area economy and for the implementation of the single monetary policy."
The European Commission is due to conclude a review of interbank lending rates spoon.
The ECB said recent work it had done with money market banks showed there was currently too little trading to create a reliable rate based purely on transactions rather than the current estimate-based system that led to manipulation.
But it pressed banks and the agencies that run benchmarks to come up with alternatives at least partly based on real deals that would better suit market needs and rebuild trust.
"The success of a new reference rate depends on the extent to which it is embraced," the ECB said.
"Under these circumstances, it could be appropriate, from a policy perspective, to consider encouraging the adoption of a more representative reference interest rate, reflecting active and liquid transactions in the interbank market, which remains resilient in times of stress."
The ECB's rate cut last July - which meant it also stopped paying banks interest on spare cash they park at the bank - had also reduced already-modest money market trading by almost a third, it said.