Royal Bank of Scotland Group plc (LON:RBS) (NYSE:RBS) (PINK:RBSPF) which is majority owned by the United Kingdom government decided to quit from the panels of Tibor, the Japanese version of Libor. Last month RBS also exited from the US dollar Hibor panel, and in October the bank will eventually exit the Hong kong dollar Hibor panel.
According to Stephen Hester, Chief Executive Officer of Royal Bank of Scotland Group plc, the bank’s decision to withdraw its involvement with the panels in Tibor was part of its business rationalization since January. Hester also announced further cuts within its business markets.
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Aside from RBS, the Citigroup Inc. (NYSE:C) and UBS AG (NYSE:UBS) also ended their participation in Tibor panel early this year after regulators found proofs that both banks were involved in an attempt to manipulate the Tibor rates during an investigation.
At present, there are only three non-Japanese banks left in the 15 strong panels responsible in setting offshore benchmarks for the European Tibor including BNP Paribas, Deutsche Bank AG (NYSE:DB) and JPMorgan Chase & Co. (NYSE:JPM). BNP Paribas SA (EPA:BNP) was the only non-Japanese bank left participating in the onshore panel for Tibor.
A trader from a non-panel bank in Tokyo described the decisions of RBS, UBS AG and Citigroup to pull out from the Tibor Panels as “pragmatic”. Meanwhile, Seiichi Tsurumi, deputy general manager of Japan Bankers Association (JBA) said that the ongoing situation with Libor is possibly affecting operations of Tibor. JBA manages the Tibor process and plans to implement necessary changes to improve its quote gathering process. According to him, the association will consider the changes recommended by the British Banker’s Association (BBA). The Tibor process is based on Libor, which is managed by the BBA.
When asked about the possibility of traders’ manipulation of lending rates within the Tibor process, Tsurumi said, “I can’t say there is no room for manipulation. There is always some risk.” He explained that JBA reduces the risk of possible attempts of individual banks to influence the result of the Tibor process by giving emphasis on the existing market rates.
Participants in Japan’s debt markets observed that Tibor rates are always higher compared with the equivalent yen rates of Libor in the London money markets. They cited the current three-month rate as an example: Tibor’s rate is 0.337 percent while Libor rate is 0.195 percent.
At present, bank regulators are implementing worldwide investigations on interbank lending rates manipulation by traders of investment banks. Previously, we also reported about the Cibor cover-up in Denmark. The issue was the refusal of the Danish Central Bank (CB) to collect data and register the local CIBOR rate enabling trader to manipulate rates as high as possible.