Despite recent attempts by the Federal Reserve Board to nudge down interest rates, rates paid by banks around the world for their own short-term borrowing rose sharply this week, probably killing any possibility that the 10 percent prime lending rate at U.S. banks will fall any time soon.

Analysts said the primary problem is that major banks, many of which are saddled with a host of bad loans and falling stock prices, are seeking now to lock up all the funds they will need through the Christmas season. The banks are said to fear that, should they wait until later in the month to borrow large amounts of money on a short-term basis, their search will be seen as a sign by investors that they are in serious financial trouble.

The result was a widening gap in recent days between the federal funds rate -- the rate banks pay for overnight loans that is heavily influenced by the Fed -- and the interest rate that banks had to pay to acquire large certificates of deposit on the open market. Normally, these two rates track one another closely. By yesterday, the CD rate had jumped to 8.75 percent, far above the 7.5 percent for the federal funds rate.

This development makes it less likely that the banks will cut their prime lending rate -- a reference rate to which most business loans and many consumer loans are tied -- any time soon. Normally, the prime is cut only when the yield on CDs falls more than 2 percentage points below the prime. But this week, the gap between the prime and the CD rate actually narrowed to 1.25 percent, rather than expanding as the Fed might have hoped.

Sam Kahan, chief economist for Fuji Securities in Chicago, said the principal reason for the jump in bank CD rates is that investors are worried about whether investments in large-sized bank CDs -- those worth $100,000 or more that are not insured -- are as safe as they used to be. And knowing that, banks are handling their year-end funding operations differently.

"The whole bank interest rate market is building in a high-risk premium," Kahan said. "In July, when the Fed dropped the funds rate to 8 percent, three-month CDs were yielding 8.1 percent. Now the funds rate is down to 7.5 percent and three-month CD are at 8.5 percent.

"The clearest part of it is that investors in general are worried if they will get their money back if they lend it {to the banks}. ... We are seeing concern not just about the U.S. banking system but the worldwide banking system," he added.

Rumors abounded on Wall Street this week that some Japanese banks were paying annualized interest rates of more than 25 percent to lock up funds now for the coming month, but they could not be readily confirmed. Kahan said if such rates were being paid by Japanese banks, which have been hurt by this year's drop in the Japanese stock market, it may be because they are afraid they will be shut out by U.S. banks in the coming months as they seek to tidy up balance sheets before the end of the fiscal years.

While some of the rise in CD rates can be tied to financial weakness of the banks here and in Japan, some of it is the result of normal December increase in demand for credit associated with Christmas and year-end balance adjustments.

For instance, in 1986 the funds rate rose close to 40 percent in the final days of the year.

"At times, we have had very substantial year-end pressures, at other times not," said Stephen Axilrod, a former Fed official, now vice chairman of Nikko Securities International in New York. "If the Fed makes enough allowance for excess reserves at the banks, it can prevent the funds rate spiking through the end of the year."

Axilrod said that with the U.S. economy as weak as it is, he assumes the Fed will be generous in supplying reserves -- essentially cash -- to the banking system to prevent such a spike. "But participants in the market are not assuming that" and therefore seeking to make sure they have enough funds now to last through the end of the year, he said.