Berlingske Business has gained official insight into a mail correspondence between the Central Bank and the Ministry of Finance. In January 2010 the Ministry of Finance requests figures from the Central Bank going back to 2004. There is little doubt that the civil servant in the Ministry of Finance is hunting for evidence that some banks are behaving mysteriously:”We need the figures to investigate if there is a pattern to where the different banks are positioned relative to the final fixing of the CIBOR, i.e. if f.i. some consistently is above or under,” the official in the Ministry of Finance writes.
In a rare interview with Harvard Business School that was published online earlier this month, (it has since been taken down) value investor Seth Klarman spoke at length about his investment process, philosophy and the changes value investors have had to overcome during the past decade. Klarman’s hedge fund, the Boston-based Baupost has one of Read More
Until now only the Central Banks reservations in the context that the CIBOR-interest was ”strange” in relation to other reference interest rates. This could have cost Danish borrowers billions of DKK in surcharge. As the Central Bank could not achieve sufficient clarity as to the fixing of the CIBOR they opted out of the controlling function of the CIBOR at the beginning of 2011.
Let leave the political”concern” and”outrage” demanding a”ruthless investigation” for what it is: Confirming grunts.
There just might be more to it than that:
In a public statement on March 2nd 2011 CEO of the Danish Central Bank Nils Bernstein answered a question from the Danish newspaper JyllandsPosten:
The Central Bank does not support the housing market. If the interest rate on variable mortgage rate bonds rise, the real estate owners must pay. This is also the case, even if the increase is extraordinary high possibly in connection with a currency crisis. It is correct that variable interest bonds are a part of our collateral basis. But that is directed toward normal monetary political operations. If we find that the system is abused in the sense that this credit extension is used to support the market we will react and have a “comradely” discussion with the institute. We have done that before. The credit extension option is not to be an assumption for a mortgage product.
The statement was repeated verbatim to the Mortgage Banks Association on March 30th 2011
This not only leaves but to possible culprits: Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY) and Nordea Bank AB (STO:NDA-SEK), as the other Mortgage Banks have another association.
The graph illustrates that we are not talking chicken feed: The Central Bank had extended credit during 2008 and 2009 of up to 280 bio. DKK (50-60 bio. USD).
The statement is also noteworthy as on the very same day March 30th 2011 the Central Bank withdrew from its controlling function in connection with the fixing of the CIBOR.
The significant word is abuse! Shortly afterwards (relatively) the CEO of Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY) announced his retirement.
There seems to be considerable muck to be raked.