The fallout from the Libor scandal continues in Europe as a crisis of confidence appears to be engulfing the rate-setting process of Euribor.

Five of the 44 banks that are called upon by the European Banking Federation, the bank industry body that oversees the process, to calculate Euribor have now pulled out of the rate-setting panel.

“The Commission is following developments on Euribor, in particular the recent departure of a number of panel banks,” said Michel Barnier, the European Union’s financial services commissioner.

Libor and Euribor, which are both calculated using similar processes, are benchmark interest rates based on rates at which banks say they think they can borrow from another bank. They underpin a vast array of financial instruments.

Regulators, who are currently looking at ways to revamp the process of setting benchmarks by possibly adding more oversight and transparency to the process, are fearful that a reduction in the number of banks on the Euribor panel will make the rate less representative and more open to manipulation. BayernLB, Rabobank, Raiffeisen, DekaBank and Citi are the five institutions to so far step away from the Euribor process.

More than a dozen banks are being investigated by regulators into the manipulation of Libor and Euribor. Barclays, UBS and the Royal Bank of Scotland are the three banks to have been fined so far.

Last month, regulators in Europe announced that they were increasing the accuracy of Euribor and beefing up oversight over how banks submit rates to Euribor after discovering some major shortcomings. They also aim to have the system revamped within the year. Again, a similar process is taking place in the U.K. with the Libor rate.

“Panel banks now have a better framework to make their contributions to benchmarks,” said Barnier. “Interbank interest rate benchmarks are of systemic importance. The harm from any manipulation of rates has an impact on the market and the public at large.

“The continued existence of interbank interest rate benchmarks is also in the interests of the market and public at large. As a result, making submissions compulsory has been decided by the U.K. authorities in relation to Libor and was also discussed in the Commission services’ consultation paper.

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

European regulators last month “identified significant weaknesses and insufficiencies in the governance of the Euribor rate-setting mechanism” and ordered a prompt implementation of the new measures that are aimed at giving more clarity to benchmark providers and users.

“We have already taken [steps] to reinforce the index setting process and governance, with the aim to avoid possible future manipulations,” said Guido Ravoet, chief executive of Euribor-EBF, which runs Euribor, last month.

Some want to see external assurances added to the process in order to help regain confidence in the markets. Libor submitters are expected to be required to obtain external assurance over their submissions once the new rules are in place.

“Recent scrutiny has highlighted weaknesses in the rules for preparing benchmarks and in their governance and controls which left them open to abuse,” said Iain Cooke, head of financial services for the Institute of Chartered Accountants in England and Wales, a U.K. accounting body.

“External assurance, combined with strengthened governance and rules for the compilation of economically important benchmarks, can help restore public trust.”

Assurance is the process by which practitioners can benchmark their figures and reports in order to give consistency. It enables auditors and other professionals to increase confidence and add credibility to business information. An independent expert expressing assurance on information usually provides a strong signal that reports are trustworthy.