ABU DHABI/DUBAI - United Arab Emirates banks will be required to provide written justifications for their quotes when they take part in a panel setting Emirates Interbank Offered Rates (EIBOR), banking sources said on Thursday.

EIBOR rates, used in many UAE financial transactions, are calculated daily for maturities ranging from overnight to one year. The central bank will adjust the way EIBOR is set on April 15, in a bid to make the system reflect market conditions more accurately.

Under the new system, the eight banks in the rate-setting panel - down from 10 banks in the old system - will have to give reasons for each of their submissions, sources familiar with the plan said.

Under the old method, they did not need to provide such justifications. The new system is designed to make quotes more transparent and ensure that banks use the same criteria for their quotes, the sources said.

The central bank did not respond to requests for comment.

The new system encourages banks to consider a wider range of trades and counterparties when submitting quotes, rather than just basing their quotes on trades with long-term bank clients to which they may lend relatively cheaply, said one source.

The result of the new system may therefore be to push up EIBOR rates slightly, though the impact is likely to be small as some banks have already expanded their reference points for quotes in recent weeks, the source said.

The three-month EIBOR rate jumped to 2.28 percent on Wednesday from 2.00 percent at the end of last month, partly in anticipation of this week's 25 basis point interest rate hike by the U.S. Federal Reserve, which the UAE's central bank imitated.

The highest and lowest quotes submitted by banks in the new panel will be discarded before EIBOR rates are calculated by averaging the submissions.

(Editing by David Evans) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))