OTTAWA (Reuters) - Canada’s banking watchdog will take on the role of supervising the country’s equivalent of the Libor benchmark lending rate, applying lessons learned from a global scandal over Libor manipulation.
The Office of the Superintendent of Financial Institutions (OSFI) said on Monday it will tell banks that submit rates for the Canadian Dealer Offered Rate, or CDOR, what its expectations are over the course of 2014.
“The Canadian heads of regulatory agencies is working to develop an enhanced CDOR oversight framework that will be informed, inter alia, by new international expectations and developments, and adapted to the unique characteristics of CDOR,” OSFI chief Julie Dickson wrote in a letter to the banks involved.
The heads of regulatory agencies is comprised of representatives from the Bank of Canada, the finance ministry, OSFI and some provincial securities regulators.
The CDOR is determined daily by a survey of rates submitted by a small group of financial institutions, including Canada’s top banks, and reflects the rates at which contributors are willing to lend to corporate clients.
An international investigation into alleged manipulation of the London Interbank Offered Rate, Libor, and other benchmarks between 2006 and 2010 has led U.S. and European authorities to fine 10 banks and brokerages around $6 billion to date and seven men have been charged with criminal offences.
Canada’s Competition Bureau this month abandoned its three-year probe into whether global banks colluded to rig the setting of the Japanese yen Libor due to lack of evidence.
In response to the scam, global regulators endorsed last year a set of principles for setting financial benchmarks to reduce the risk of abuse.
Dickson said the principles would be adapted to suit the CDOR, which is a committed lending rate and not a borrowing rate like Libor.
“Given the differences between the two benchmark rates, certain issues that have been identified regarding LIBOR do not apply to the same extent in the case of CDOR,” she said.
Reporting by Louise Egan; Editing by Peter Galloway