Bloomberg News

Japan Bank Lobby to Consider Review of Tibor Reference Banks

July 18, 2012

Japan Banking Lobby to Consider Review of Tibor Reference Banks

Citigroup Inc. and UBS AG in December were ordered by Japanese regulators to suspend some operations after the banks’ staff were found to have attempted to influence Tibor rates. Photographer: Scott Eells/Bloomberg

The Japanese Bankers Association is considering a review of as many as 16 banks to confirm that they are following the lobbying group’s guidelines for submitting yen-denominated Tokyo interbank offered rates.

As many as 15 reference banks may be reviewed for how they submit their euro-yen Tibor rates, said Hisanao Aoki, a spokesman for the association.

Barclays Plc (BARC) last month was fined 290 million pounds ($453 million) for rigging London interbank rates, prompting authorities in Europe, Asia and the U.S. to broaden inquiries into manipulation of benchmark gauges for borrowing costs. Citigroup Inc. (C:US) and UBS AG (UBSN) in December were ordered by Japanese regulators to suspend some operations after the banks’ staff were found to have attempted to influence Tibor rates.

“There’s growing pressure from Japanese lawmakers on the banking industry to determine and confirm that Tibor has been properly submitted and set without any wrongdoing,” Shinichi Nakamura, a Tokyo-based analyst at SMBC Nikko Securities Inc. “If any bank is found to have attempted manipulation of the rate, it would be a huge problem.”

The Asahi newspaper reported the Japanese association’s plan earlier today.

Rate Setters

The reference banks, including the lending units of Mitsubishi UFJ Financial Group Inc. (8306), JPMorgan Chase & Co. and Deutsche Bank AG, are responsible for submitting interbank offered rates to the association, which compiles them and sets the benchmark, according to the lobbying group’s website.

The ruling Democratic Party of Japan tomorrow plans to call on the banking lobby to explain how Tibor is set, lawmaker Tsutomu Okubo said yesterday. The former Morgan Stanley banker is heading a panel examining financial firms.

Former association chairman Katsunori Nagayasu said in February that the group may take measures to improve the way it compiles the nation’s interbank lending rate following the Financial Services Agency’s penalties for Citigroup and UBS. Any changes would be based on guidance from investigators, he said at the time.

Yasuhiro Sato, who became president of the association in April, is scheduled to meet with reporters tomorrow afternoon in Tokyo for a monthly press conference. Sato is also president of Mizuho Financial Group Inc. (8411), Japan’s third-largest lender by market value.

Global Investigations

In South Korea antitrust regulators are investigating some brokerages for allegedly colluding to keep a key money-market rate artificially high, press officials at three brokerages with knowledge of the matter said yesterday.

South Korea’s 91-day certificate-of-deposit rate is a benchmark for banks’ variable rate for lending and borrowing as well as for interest swaps and floating yields for bonds.

In the U.S., attorneys general in at least five states have begun investigations related to alleged manipulation of the Libor rate, adding to probes by U.S. and U.K. authorities.

The investigations are being conducted by New York, Connecticut, Massachusetts, Florida and Maryland.

Barclays traders who allegedly manipulated rates from 2005 to 2007 may be charged by U.S. prosecutors before Sept. 3, according to a person familiar with the U.S. Justice Department’s investigation. The scandal led to the resignation of Robert Diamond as the bank’s chief executive officer.

Royal Bank of Scotland Group Plc, UBS AG, and Lloyds Banking Group Plc are among lenders facing inquiries over alleged rigging of Libor, the benchmark interest rate for financial products valued at $360 trillion.

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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