London - Banks may be forced to help compile key interest rates such as Euribor under a draft law the European Union's financial services chief will propose later this year to help clean up benchmark rates that several lenders have rigged.

More than a dozen banks are being probed by regulators over the manipulation of Euribor and Libor, inter-bank lending rates used to price trillions of dollars worth of loans.

This week, Royal Bank of Scotland became the third bank in eight months to be fined for rigging rates.

“The Commission will propose further legislation on benchmarks in the second quarter of 2013 in order to further clarify the framework under which benchmarks should operate,” Michel Barnier said on Friday.

The rate-rigging scandal and uncertainty over how benchmarks will be directly regulated has led to three banks - BayernLB, Rabobank and Raiffeisen - pulling out of the Euribor panel.

“Any banks considering withdrawing from the contributing panels should therefore take into account that they may be required to rejoin the panels,” Barnier said.

The European Central Bank said: “For such rates to remain representative, it is essential that there is an appropriate level of bank participation in the respective panels.

“In the light of these initiatives, the Eurosystem strongly encourages banks to remain in, or join, the Euribor panel to prevent potential disruptions to the functioning of the financial markets while the regulatory framework is being refined,” the central bank said.

Barnier said he has already asked the European Banking Authority and the European Securities and Markets Authority to identify banks “which should be subject to a mandatory participation in benchmark setting”.

Britain has also been looking at making it mandatory for banks to submit quotes for compiling Libor. - Reuters