FRANKFURT--Germany's banking watchdog BaFin Tuesday warned that
the process for setting the benchmark lending rates, Libor and
Euribor, are still exposed to manipulation despite the introduction
of certain security standards.
"In the mid-term, there is no way around establishing
alternatives [for calculating Libor, Euribor] which are, as far as
possible, based on actual transactions in liquid markets," BaFin's
President Elke Koenig said Tuesday.
The German regulator has asked all the banks on the panels that
establish the rates to introduce minimum standards in a bank's
organizational set-up to prevent traders from rigging them.
These panels also include one or both of the country's two
largest banks, Deutsche Bank AG (DBK.XE) and Commerzbank AG
(CBK.XE).
The interbank lending rates affect private households and
companies as they serve as a proxy for all sorts of banking
products, ranging from swaps to mortgage loans.
Global banks stand accused of manipulating the London interbank
offered rate, or Libor, a scandal that has ensnared at least 16
financial institutions. The British bank Barclays last year paid
more than $450 million to settle allegations by U.S. and British
authorities that its executives and traders had rigged Libor.
BaFin's Ms. Koenig said the regulator so far hasn't found
evidence for German banks having manipulated benchmark rates
systematically, but added that the special audit hasn't concluded
yet.
Commenting on the stability of the German sector, Ms. Koenig
said the country's large banks have reduced the gap to meet new
banking rules called Basel III to 14 billion euros ($18.11 billion)
from around EUR32 billion earlier.
"This is good news," she said.
Write to Eyk Henning at eyk.henning@dowjones.com and Alexandra
Edinger at alexandra.edinger@dowjones.com
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