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Exclusive: UAE central bank working to replace interbank rates


© Reuters. FILEPHOTO: The UAE flag flew over a Dubai Marina boat on May 22, 2015, United Arab Emirates. REUTERS/Ahmed Jadallah/File Photo

By Davide Barbuscia and Tom Arnold

DUBAI (Reuters) – The United Arab Emirates central bank is studying ways to replace the local interbank rate, three sources said, as it tries to catch up with global regulators who have called time on such benchmarks after banks’ attempts to rig them.

The UAE is looking at potential replacements for EIBOR – the Emirates Interbank Offered Rate which is used to price financial instruments in the Gulf’s top financial centre – and has started consultations with commercial banks in recent weeks, said three sources familiar with the matter.

Based on estimates from banks about how much money it would take to borrow money, the London Interbank Offered rate (Libor), and similar IBOR benchmark rates are calculated. These rates are used for interest calculations on various types of financial transactions like bonds and loans.

Global regulators are planning to eliminate widespread usage of these rates by the end this year. This is after an international rate-rigging scandal, which began 10 years ago.

Sources say that this is a very preliminary process and they are still consulting with the UAE authorities. They also said that the UAE process might take over a year.

As the replacement of EIBOR is not yet publicized, this source spoke on condition that he remain anonymous.

The UAE must change with the times. According to the same source, Libor scandals led to you wanting to display a comparative rate.

EIBOR is administered by the UAE central bank. The UAE central banking did not respond.

Libor contracts will be switched to risk-free overnight rates, compiled by central bankers such as Sofr at the U.S. Federal Reserve or Sonia at Bank of England.

As the UAE seeks to improve its position as the Middle East’s economic hub, the consultations with the UAE are being held.

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