Libor

 

 

LIBOR scandal update.

De Zeit

Quote:

”The British Central Bank has some explaining to do in the scandal about major banks manipulating the LIBOR interest rate. USA pressed Bank of England for changes in the determination of the LIBOR-rate four years ago. That is revealed by documents published by FED.”

Quote:

”Former FED – regional CEO and current US  Secretary of Finance Timothy Geithner recommended in a private email Bank of England CEO Mervyn King six possibilities to strengthen the credibility of the LIBOR-rate.”

“The FED clarified with emphasis that they reacted immediately on the first doubt about the fixing of the LIBOR-rate. Geithner suggested in the two-page email, among other things, BoE CEO Mervyn King a standard procedure for the determination of the LIBOR in order to avoid false reports – with and without intention.”

The Danish CB refused from March 30th 2011 any responsibility for the fixing of the CIBOR-rate:

 

Quote:

”The Danish CB investigated in September 2010 the Danish money market and determined then that the trade in unsecured lending in DKK had fallen.”

Comment:

This directly involves negligence from the Bank of England (British CB). But what is even more significant is that all the major banks are implicated – and it is not only the LIBOR (which could be said to be a British problem); but also the EURIBOR, which is the EUR-zone interest rate and the CIBOR which is a non-EUR rate; but also in the European Union.

We are not just talking about a “connection on the blink” between the EUR and non-EUR currencies; but as the Dutch De

Telegraaf mentions:

ING, Rabobank, ABN AMRO, AEGON, Direktbank, Westland Utrecht Bank, Friesland Bank, SNS Bank, Zwitser Leven and Obvion Hypotheken.

Strangely enough the matter doesn’t seem to concern Spain too much.

But Die Zeit continues (quote):

“The pressure spreads in the EU: Commissioner for Competition Joaquin Almunia threatened to intervene in the financial sector – if the manipulation suspicions should be confirmed. The investigations are concentrated on a suspected cartel that has cooperated in the fixing of the interest rates, said Almunia.

If the suspicion are confirmed: “will we take appropriate actions to bring about a change of culture in the financial sector”, said Alminia.”

Comment:

Well this is a development: Up to now the matter has mainly been the concern of the ECB – and the EU commission in general in connection with proposals for a common European bank inspection.

Up to now the main commissioners and EU ministers involved have been the economic and financial.

Generally cartels are discouraged in European law and not necessarily broken up as in the USA. That has something to do with the greater ease cartels are formed in smaller countries – and that f.i. Germany has always had very big companies – and cartels. The efforts are more in the direction of controlling cartels.

Control would really involve prying into very delicate bank information. This would involve not only hoodwinking the bank inspections (hmm….), but also another set of controllers. That would mean the end of bank secrecy – which is probably the objective.

Musings:

–          It seems like internet banking suffers problems all over Europe the last month or so. Reports have come from Ulster, Nederlands and Denmark. Connection?

–          The limited interest in Spain points to a duality in the campaign:

  • The smaller and non-systemic banks are being nationalised, consolidated and recapitalised.
  • The major bank – or systemic important – seem to be dealt with differently: The bank rescue in Spain specifically does NOT involve the three largest banks.