January 16, 2013 6:32 pm

Norway launches interbank rate probe

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The Norwegian financial regulator is investigating possible manipulation of the local interbank lending rate after a complaint by a foreign bank.

In the latest in a series of worldwide probes into whether banks manipulated money market rates such as Libor that have led to big fines for Barclays and UBS, the Financial Services Authority in Oslo said it was investigating volatile trading in Nibor, the Norwegian interbank offered rate.

The investigation started after the Norges Bank, the country’s central bank, received emails from what it calls a “foreign bank” alleging market manipulation, which it then passed on in August to the FSA.

Nordic countries had hitherto been looking at how to reform their interbank rates – on which large volumes of loans to households and companies are based – but the Norwegian probe is the first investigation by a regulator.

Morten Baltzersen, director-general of the FSA, told the Financial Times that no evidence of manipulation had been provided but that “some market participants have from time to time asserted in general terms that volatile or unusual Nibor fixings are clear indications of market abuse”.

Emails obtained by the newspaper Aftenposten from an unnamed foreign bank point to the difference between various maturities of Nibor such as three, six and nine months. “If this is not manipulation, I do not know what is,” one of the emails is quoted as saying.

Nibor is set by six Nordic banks: DNB, Danske Bank, Handelsbanken, Nordea, SEB and Swedbank.

Finance Norway, the trade body that sets the rules on Nibor, said it had taken the allegations seriously. “However, the conclusion was that the variations in Nibor had been well within what can be explained by normal factors,” said Jan Digranes, head of the banking and capital markets department.

Nibor is calculated in a different way to other interbank rates, according to Finance Norway, with banks submitting their levels based on US interest rates they can receive as well as the difference in the exchange rate between the Norwegian krona and US dollar.

Mr Digranes added that because of big swings in the currency because of oil-related inflows and outflows Nibor often fluctuated more than other rates and that following rate decisions from the central bank volatility was higher with occasionally different maturities moving in opposite directions.

Shortly before Christmas, the Norwegian government asked the FSA to look into reforming the way Nibor was calculated. Sweden decided last week that the Swedish Bankers’ Association should take over responsibility for setting so-called Stibor, going against a trend of taking power away from industry groups. Denmark is also looking into reform of its local rate despite finding no evidence of manipulation.

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