Bloomberg News

Bank E-Mails Reveal Allegations of Manipulation of Norway Rates

January 18, 2013

Norway’s financial regulator and central bank have received e-mails since 2010 from bankers outside the country alleging that interbank lending rates were being rigged.

The complaints came from “foreign banks,” raising concerns about the manipulation of the Norwegian interbank offered rate, or Nibor, the central bank said in an August letter to the Financial Supervisory Authority obtained by Bloomberg today.

“As a market participant and as one of the largest issuers of Norwegian denominated debt I am writing to complain about the Norwegian fixings,” a banker, whose name was blacked out, wrote in a June 2010 e-mail that was released by the central bank. “They seem to bear no resemblance to market realities and we suspect fixings that resemble market abuse.”

The central bank in December announced it was investigating the setting of the rate, which is used as benchmark for mortgage rates, corporate bond yields and derivative contracts. Nibor is calculated as an average of rates published by a panel of banks for various maturities, excluding low and high quotes, according to the Finance Norway, which represents banks in the country.

The panel is made up of DNB ASA (DNB), Danske Bank A/S (DANSKE), Svenska Handelsbanken AB (SHBA), Nordea Bank Norge ASA, SEB AB (SEBA) and Swedbank AB. (SWEDA) Since there are very few loans given between banks that extend beyond a few days, longer maturity Nibor rates are based on U.S. dollar rates and on the term premium for the dollar and krone, according to the central bank.

More Volatile

The currency aspect has made Nibor more volatile, the central bank said.

“We don’t recognize ourselves in the accusations directed at determining Nibor,” Oslo-based Danske Bank spokesman Stian Arnesen said in an e-mailed reply to questions. “We have good internal procedures for determining our contribution and we do trust the routines for Nibor fixing determined by Finance Norway.”

Nordea spokesman Thomas Sevang said the bank “welcomes that this is being investigated,” by phone today. “We have no reason” to believe “that anything is wrong and we follow that procedure,” he said.

Handelsbanken has “no information that suggests any wrong- doing,” spokesman Lars N. Saethre said by phone. “We regard this as unlikely.”

In a June 2010 e-mail, a banker said Nibor moves have “failed to reflect the prevailing market conditions” and since they have trades that are affected by the rate, they “wouldn’t wish to feel that we are at the whim of the local panel banks.”

‘Big Player’

An e-mail from a “big market player” in March last year said moves in Nibor showed it was clear the panel kept rates up until a “position” rolled off. “If this isn’t market manipulation I don’t know what is,” the author of the e-mail wrote.

An e-mail from “a large international bank” to Finance Norway, which was forwarded to the central bank, recommended authorities look into “what off balance sheet deals they had fixing.”

Dagens Naeringsliv reported today that one of the complaints was sent by a banker at Royal Bank of Canada. The central bank declined to say who sent the e-mails. RBC spokeswoman Louisa Fairman also declined to comment.

FSA Monitoring

Jan Digranes, head of the banking and capital markets department at Finance Norway said “We have no reason to believe that there has been any manipulation of the interest rate,” by phone today. The group represents about 200 financial institutions operating in Norway.

The Finance Ministry in December asked the FSA and Norges Bank, as the central bank is called, to assess whether Nibor accurately reflects the rates on unsecured loans between banks and whether fixing is sufficiently robust. The ministry also backed calls from the financial regulator for improved supervision of the rate. The FSA will monitor individual banks in cases where there is reason to suspect manipulation, it said.

Interbank rates have come under international scrutiny after Barclays Plc was fined a record 290 million pounds ($468 million) in June for attempting to rig the London interbank offered rate and the European Interbank rate. At least 12 banks including Deutsche Bank AG are being investigated for manipulating Libor.

In Scandinavia, Denmark has conducted a probe of the Copenhagen interbank offered rate amid speculation it was manipulated during the financial crisis, while Sweden has also reviewed its equivalent rate, called Stibor.

Norway’s central bank has repeatedly pointed to weaknesses in Nibor. Former central bank Governor Svein Gjedrem in 2010 exposed shortcomings in the way Nibor is set, saying the bank will take steps to improve the structure. Gjedrem became secretary general at the Norwegian Finance Ministry in 2011 after completing two terms as central bank governor.

To contact the reporter on this story: Josiane Kremer in Oslo at Jkremer4@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman in Oslo at jbergman@bloomberg.net


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