COPENHAGEN (Reuters) - Denmark will establish a supplement to its CIBOR bank to bank lending rate and launch a supervisory authority to control its setting, after the British LIBOR scandal shook confidence in its Danish equivalent.
The Minister for business and growth, Ole Sohn, said in a statement the action would be taken to re-establish confidence in the CIBOR rate, and that a report had found no manipulation of the rate.
“It is for me decisive that there is confidence in the financial system, including the reference rates,” Sohn said in a statement.
“In spite of there being no indication of manipulation with the rate, not everything in this process has been a pretty sight,” Sohn said.
The ministry’s report was launched in the wake of the Libor scandal which led to questions regarding the setting of CIBOR.
The Danish Bankers Association (DBA), which calculates, publishes and collects data for the Copenhagen Interbank Offered Rate, estimated between 5,000 billion Danish crowns and 7,500 billion Danish crowns ($861.04 billion to $1.29 trillion) worth of financial contracts and securities had been issued based on Cibor rates.
“The CIBOR case has shown that there is a need for a public supervisory authority to control the setting of the rate,” Sohn said.
In a review published at the start of September the DBA said it believed the setting of the rate was accurate but that it would increase the transparency of its procedures, work to find more banks to contribute, and support the establishment of a public supervisory body.
Seven banks currently contribute to setting the rate, which Nordea Bank (NDA.ST)NDA.CO has estimated is the basis for about a fifth of home loans in Denmark.
Barclays Plc (BARC.L) last month pulled out of the rate-setting panel for Cibor, the second panel the British bank has quit after being rocked by the interest rate rigging scandal.
The Danish Central Bank, Nationalbanken, had collected, calculated and published the Cibor rate until April last year when it pulled out saying it did not feel able to evaluate whether the banks’ daily reporting of the rate was fair.
Nationalbanken has said replacing Cibor was not realistic due to the large amount of outstanding contracts. ($1 = 5.8069 Danish crowns)
Reporting by Mette Fraende; Editing by Patrick Graham