Swiss question 12 banks as Interbank lending rates probe widens
Baku, February 4 (AZERTAC). Swiss Competition Commission investigates a dozen banks for possible manipulation of Libor and Tibor while US, EU and British probes are already under way.
Switzerland is investigating 12 US, European and Japanese banks suspected of conspiring to manipulate interbank lending rates used to set interest rates on hundreds of trillions of dollars of securities.
The Swiss Competition Commission (Comco) said on Friday it had received information of possible collusion between derivatives traders concerning London Interbank Offered Rate (Libor) and Tokyo Interbank Offered Rate (Tibor).
"Derivative traders working for a number of financial institutions might have manipulated these submissions by co-coordinating their behavior, thereby influencing these reference rates in their favor," Comco said in a statement.
Libor is derived from the rates that banks say they charge each other and is used worldwide as a benchmark for setting rates on about $350-trillion of derivatives and other financial products. Small changes in the rate can have a large effect on the amounts of interest that can be charged.
It is also the benchmark reference rate used by the Swiss National Bank in setting monetary policy.
Comco said those under investigation were Bank of Tokyo-Mitsubishi UFJ, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Mizuho Financial Group, Rabobank, Royal Bank of Scotland, Société Générale, Sumitomo Mitsui Banking Corporation and UBS.
US, European Union and British regulators are also investigating whether banks understated inter-bank rates to reduce borrowing costs and downplay investor panic during the banking crisis.
Libor rates spiked during the crisis but were widely criticized at the time for not having risen enough to reflect real inter-bank prices.
Banking sources have said there was some political pressure to keep a lid on Libor during the credit crunch and commercial banks were lobbied to keep borrowing costs down.
"There was the fear that if Libor went up a large number of ARMS (adjustable rate mortgages) would reset at meaningfully higher rates and default rates would explode," said a source from one of the Libor reporting banks last year.
During the liquidity crisis, when banks were reluctant to lend to one another, central banks stepped in to fill the void.
"To bring down Libor, central banks can do one of two things: they can reduce the base rate or flood the market with liquidity, and in this case they did the latter," the source said.
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