Impossible for Traders at 5 Banks to Rig Euribor Rates, EBF Says

Traders at five banks would have found it impossible to successfully manipulate the euro interbank lending rate known as Euribor, said the head of the European Banking Federation.

“It’s impossible for those five banks to really have an impact on the daily Euribor index,” Guido Ravoet, the EBF’s chief executive officer, told Bloomberg Television in an interview today. “You need at least more than 15 banks really aligning their quotes to have any effect on the Euribor.”

Confidence in the Euribor and London interbank offered rate, or Libor, benchmarks for trillion of dollars’ worth of financial products worldwide, has been dented by Barclays Plc (BARC)’s admission that it submitted false rates. Robert Diamond, who resigned as London-based Barclays’s CEO after the bank was fined 290 million pounds ($455 million), told British lawmakers this month that other banks also lowballed Libor submissions.

Ravoet said in a separate interview that he had no direct knowledge of whether any traders had attempted to rig Euribor and was referring to press articles that cited the involvement of traders at five banks.

He said he is confident that Euribor rates weren’t successfully manipulated because of the difficulty of coordinating rates between the 44 banks on the panel.

“They can have an attempt to do it but we are quite sure that there is no impact on the integrity” of the rate, Ravoet said on Bloomberg TV. “We condemn very strongly the wrongdoing of some traders” and their apparent attempts to fix the rate.

Antitrust Raids

Barclays’s submitters received at least 58 requests for how they should report the Euribor rate from September 2005 to May 2009, 20 of them from traders at other banks, the U.K. Financial Services Authority said last month. Short-term interest-rate contracts valued at 241 trillion euros ($295 trillion) are based on the three-month Euribor futures contract, making it the world’s fourth-largest interest-rate futures contract by volume, the FSA said.

European Union antitrust regulators in October raided banks that offer financial derivatives linked to the Euribor rates, saying they were investigating possible collusion. The European Commission is also separately reviewing the governance of interbank lending rates, which are based on banks’ own estimates of what it would cost to lend or borrow every day.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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July 20 (Bloomberg) -- Guido Ravoet, chief executive officer of the European Banking Federation, discusses the possible manipulation by traders of the Euro Interbank Offered Rate and the outlook for U.S. banks. He speaks from Brussels with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)