TORONTO (Reuters) - Canada’s financial benchmarks have not been manipulated the way the London Interbank Offered Rate (Libor) has, and the country is tightening its rules to try to make sure they never are, Bank of Canada Deputy Governor Tim Lane said on Monday.
“Whether it is a liter of wine, a pound of butter or an interest rate benchmark, there should be no question that measurements for commercial and financial transactions are accurate and fair,” he said in the prepared text of a speech in Toronto.
The closest Canadian equivalent to Libor is the Canadian Dealer Offered Rate, and Lane said special features of CDOR make it less likely to be subject to the problems that afflicted Libor.
Nonetheless, on behalf of Canadian financial authorities, the Bank of Canada has discussed with industry “the need for it to establish more formal administrative arrangements for CDOR”. He also said banks on the CDOR panel are set to release a submitters’ code of conduct fairly soon.
He noted that the Office of the Superintendent of Financial Institutions announced in January that it would take on the role of supervising CDOR and that the federal government announced in its budget that it would include a regulation-making authority in the Bank Act to cover bank submissions to financial benchmarks.
Work has also begun on what changes may be needed to the Canadian Overnight Repo Rate Average (CORRA), which the Bank of Canada calculates and publishes based on broker-submitted data.
Lane said the Bank of Canada recognizes that the indicative foreign exchange rates that it posts, while not intended as benchmarks, seem to be used as benchmarks for some transactions.
“While there is no evidence of market manipulation affecting the Bank of Canada’s rates, we are reviewing these rates and considering any changes that may be appropriate,” he said.
Writing by Randall Palmer in Ottawa; Editing by Jeffrey Hodgson; and Peter Galloway