SYDNEY, March 28 (Reuters) - Australia is scrapping thepanel that sets interbank lending rates after the proposal ofnew international guidelines and an exodus of the banks that setthe rate in the wake of the Libor rate-rigging scandal.
The Australian Financial Markets Association (AFMA), whichadministers Australia's bank bill swap (BBSW) reference rate,said it would bypass the panel and derive the rates directlyfrom brokers and electronic markets.
"An advantage of this enhancement is that it will remove theneed for a BBSW Panel, which will eliminate the associatedcompliance and ancillary costs which otherwise exist forpanellist banks," the AFMA said in a statement issued late onWednesday.
"This change is subject to technical requirements beingsatisfied, but it is hoped that this solution will be achievablewithin a period of months."
Banks around the world are reviewing their involvement ininterest-rate setting panels after regulators dished outbillions of dollars in fines to banks, including Barclays, UBS and Royal Bank of Scotland, formanipulating the London Interbank Offered Rate, known as Libor.
Earlier this month, JP Morgan Chase & Co confirmedit was pulling out of the BBSW, joining UBS, which left earlierthis year.
The Swiss bank's move followed the publication of a U.S.Commodity Futures Trading Commission report into itsmanipulation of Libor and its Japanese yen equivalent.
The AFMA said HSBC and Citibank were alsopulling out of the panel, meaning the panel will drop to 10members from the end of March.
Submissions to the BBSW process report the prevailing pricesfor a single type of clearly defined and homogeneously tradedpaper from four "prime banks" and observed by up to 14panelists. The six middle submissions set the rate.