Battle of the banks of interest to everyone

The interbank offered rate in the UAE remains stubbornly high. The Central Bank believes the solution to a lower Eibor is to change the way it is determined. Asa Fitch reports

The Central Bank’s recent decision to establish a new benchmark interbank interest rate is the latest salvo in an ongoing tussle between the regulator and the country’s banks.

The banks have an interest in keeping the nominal interbank lending rate – or the interest rate they charge each other for short-term loans – at a high level, even if actual market rates are lower. Why? Those interbank rates form the basis from which a lot of loan products are priced.