Libor discrepancies persist despite official guarantees

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\viewkind4\uc1\pard\highlight1\f0\fs24 By Jamie McGeever and Kirsten Donovan - Analysis\par

LONDON (Reuters) - Worldwide banking sector bailouts have yet to level the playing field when it comes to seeking funds and persistent discrimination is keeping interbank borrowing costs elevated.\par

The various guarantees to the banking sector from governments around the world have boosted confidence and helped to lower money market rates significantly over the last two weeks, at least for borrowing over shorter periods.\par

But banks whose balance sheets have withstood the crisis independently continue to raise funds more cheaply, while the penalty payable by those wanting to making use of the extensive government guarantees could make it uneconomical to do so.\par

Traders say banks are only cautiously starting to lend money again and only to names that have always been perceived as "higher quality."\par

"While the guarantee reduces the perceived risk of interbank lending and should therefore make it cheaper, a significant fee would tend to act in the opposite direction, adding to borrowing costs," Goldman Sachs analyst Ben Broadbent wrote in a note this week.\par

While government guarantees differ and have varying strings attached, an example of how this might pan out is the UK scheme.\par