FRANKFURT (Reuters) - The euro zone's top lenders decided on Thursday to adopt the European Central Bank's newly created rate of overnight inter-bank lending as their new benchmark, in the first move to reform a crucial market beleaguered by manipulation scandals.
The ECB's euro short-term rate (Ester) will replace Eonia as the reference gauge of how much banks charge for lending to each other overnight, a key metric of the health of the banking system and the basis for pricing trillions of euros worth of financial contracts.
The decision by a panel of 23 institutions, organised by the ECB and mostly comprised of large commercial banks, marked the first concrete move away from the Euribor series of interest rates after manipulation scandals in 2012 tarnished market faith in them.
"Ester will also provide a basis for developing fallbacks for contracts referencing the Euribor," the working group said in a press release published on the ECB's website.
Ester will be based on transactions between 52 banks on a volume of some 30 billion euros per day according to a presentation on the ECB's website.
The ECB developed Ester after an industry attempt to come up with its own benchmark failed earlier this year, in a sign that banks were still reluctant to commit to the initiative after the costly litigation that followed the Euribor scandal.
(Reporting By Francesco Canepa; Editing by Balazs Koranyi)