FRANKFURT, July 25 (Reuters) - Euro zone bank-to-bank lending rates fell to new all-time lows on Wednesday, driven down by record-low European Central Bank interest rates and growing expectations that it could take them further down in the coming months.
The ECB's overnight deposit rate, which it cut to zero on July 5, acts as a floor for money market rates as banks only lend to rival banks if they are able to earn a better rate of interest than at the central bank.
The ECB hopes its unprecedented move, which means banks now get nothing if they park their spare cash there, will nurture a return of more significant interbank lending by forcing banks to look for more profitable options.
Although some money market experts fear the cut could backfire and kill off parts of the market, the move, plus a growing belief the ECB could continue to cut rates, has had an immediate impact on bank-to-bank rates.
On Friday, ECB Executive Board member Benoit Coeure said that cutting the deposit rate below zero is an option.
Three-month Euribor rates, traditionally the main gauge of unsecured bank-to-bank lending, hit a new all-time low of 0.427 percent from 0.435 percent.
Other key rates saw similar drops. Six-month Euribor rates fell to 0.712 percent from 0.721 percent. Shorter-term one week rates dipped to 0.109 percent from 0.111 percent and overnight rates decreased to 0.113 percent from 0.116 percent.
Euribor rates, like counterpart Libor bank-to-bank rates , are at the centre of a manipulation scandal after it emerged a number of banks were falsely submitting the Libor rates they pay.
Dollar-priced three-month bank-to-bank Euribor lending rates fell to 0.911 percent from 0.923 percent, while overnight dollar rates dipped to 0.331 percent from 0.333 percent.
The ECB's move to stop paying interest on banks' deposits saw almost half a trillion euros transferred from the ECB's deposit facility to banks' current accounts last week.
But with the monthly reserves cycle now in its stride and fewer options available for banks to juggle their funding, the money has started to stabilise.
A total of 324 billion euros was parked in the ECB's deposit facility overnight. Banks' current account deposits at the ECB rose to 506 billion euros.
Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.
* For a table of the latest Euribor fixings for terms of one week to one year, double click on
* For a table of the previous day's fixings of EONIA swap rates, which show market expectations for future overnight lending rates, double click on
* For graphs of historic Euribor and EONIA swap rates, right click on the links in angle brackets below, and select 'Related Graph'
1 year (Reporting by Frankfurt newsroom)