BRUSSELS, May 4 (Reuters) - The Euribor rate will continue to be set under the existing methodology based on banks' quotes, the body that sets the reference rate said on Thursday after it discarded planned reforms citing current market conditions.
The plan to overhaul the Euro Interbank Offered Rate (Euribor) began after several financial institutions were fined as part of an inquiry into how the rate is set. The Euribor determines rates on loans and financial contracts.
The European Money Market Institute (EMMI), which publishes the daily reference rate, aimed to develop a different methodology based on actual transactions instead of on quotes provided by the banks.
But after testing the impact on the market of the new setting, the EMMI said in a report: "The current market conditions do not allow for a methodology which relies exclusively on transactions."
Its analysis of the market showed that the new transaction-based methodology would have had an excessive impact on rate levels, volatility and transaction volumes, the EMMI said.
Despite discarding the plan, the EMMI said it would continue in the coming months to explore the possibility of developing an alternative "hybrid" methodology "supported by transactions whenever available and relying on other prices when necessary".
European money market futures had risen on Wednesday after analysts said a possible replacement of the quote-based methodology could lead to lower daily fixings and higher volatility. (Reporting by Francesco Guarascio; Editing by Gareth Jones)