Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Danish Bank Group Rejects Libor Parallels in Cibor Probe

Danish Bank Group Dismisses Libor Parallel as Cibor Probe Starts
The rate, which is based on quotes by eight banks including Danske Bank A/S, Nordea Bank AB and Barclays Capital, shows what banks say they are willing to lend at. Photographer: Tomm W. Christiansen/Bloomberg

The Danish Bankers Association will investigate whether the Copenhagen interbank offered rate was manipulated as it dismisses parallels with the scandal over the equivalent London-based rate that led to the departure of Barclays Plc Chief Executive Officer Robert Diamond.

The results of the Cibor probe are due to be released by the “end of the summer” and will be based on interviews with all stakeholders, including pension funds and mortgage lenders, Joergen A. Horwitz, the group’s director, said in an interview.

“I have absolute confidence in Cibor,” he said. “But it may be a problem if other people don’t.”

Cibor, which Business Minister Ole Sohn said July 10 should be probed after bank SEB AB said the rate had been quoted too high, is the benchmark for about 20 percent, or $70 billion, of all Danish residential and commercial property loans. The rate, which is based on quotes by eight banks including Danske Bank A/S, Nordea Bank AB and Barclays Capital, shows what banks say they are willing to lend at. Libor, in contrast, is the rate at which banks say they can borrow.

“There’s no connection between Libor and Cibor,” Horwitz said. “It’s a completely different issue.”

Barclays Plc, the U.K.’s second-largest bank, was fined a record 290 million pounds ($450 million) last month for attempting to rig Libor and Euribor to manage its reputation during the financial crisis and boost earnings before it. At least 12 banks including Deutsche Bank AG are being investigated for manipulating Libor.


The Danish central bank handed Cibor publication over to Nasdaq OMX Group Inc. in April last year, saying it could no longer “assess the quality” of the rate. The Libor scandal has since reinvigorated Danish lawmaker efforts to investigate Cibor. Kim Andersen, business spokesman for the opposition Liberal Party, said parliament needs to take seriously the risk of local interbank rate rigging as the investigation around Libor deepens.

“We also need to look at the matter in a Danish context,” he told Copenhagen-based newspaper Berlingske in a July 4 article. “We need to find out whether there are parallels to what we’ve seen with Barclays in England.”

The investigation by the Danish Bankers Association will probably be finished before a separate study being conducted by the government, which Sohn said this month won’t be ready until September.

Financial Problem

The Danish Confederation of Industry, which represents 10,000 companies, said finding out whether banks have set Cibor too high is critical as one-third of members report difficulty in getting affordable funding.

“We haven’t heard any specific complaints about the way that Cibor is collected, but the financial situation is a problem for many of our firms,” Klaus Rasmussen, the industry group’s chief economist, said today. “They can just see that the banks are getting more and more interest from them.”

The confederation will wait for the conclusion of the government panel’s investigation before deciding what action to take, he said. “We have noticed that the central bank withdrew from making the statistics for Cibor. Since then we have asked ourselves, what is going on?”

Horwitz said his association is also looking into the merits of an alternative rate based on the so-called Cita, or the Copenhagen interbank tomorrow/next average. The central bank last year proposed Cita-swap rates be used as a base for a supplementary rate to Cibor in an effort to boost confidence in Denmark’s interbank market.

Cita Proposal

Previous efforts to supplement Cibor with Cita stalled because there were too few international banks willing to provide quotes, according to the association.

“Most Danish lenders quoting Cibor are also quoting Cita, while we weren’t able to get enough quotes from foreign banks,” Horwitz said. “We’re now making a renewed effort as there is now a demand for another reference rate.”

Meanwhile, Cibor was quoted at a record low today. Three-month Cibor was fixed at 0.355 percent, the lowest since at least 1988 and down from 1.68 percent a year earlier. The highest level the rate was ever quoted at was in 1992, when it reached 23.5 percent. In October 2008, one month after the collapse of Lehman Brothers Holdings Inc., Cibor was fixed as high as 6.4367 percent.

Negative Rates

Cibor has continued to decline since July 5, when the central bank lowered policy rates to record lows, bringing its deposit rate below zero for the first time. Banks depositing funds for one week with the central bank, which defends to krone’s peg to the euro, now need to pay 0.2 percent to do so.

Borrowing costs on Denmark’s bond-funded mortgages have also sunk to record lows as the AAA rated nation attracts investors looking for alternatives to euro-denominated assets. Denmark’s government debt will be about 40 percent of gross domestic product this year and next, less than half the euro-zone average, the European Commission said on May 11.

Nordea Kredit, the mortgage arm of Nordea Bank, is ignoring warnings about Cibor fixing and basing a new mortgage-backed bond on the rate. The bank argues that even if the rate were set too high, investors will ensure that borrowers don’t suffer.


“Home buyers won’t pay too high or too low an interest rate as the effective Danish mortgage market, dominated by professional investors, will quickly compensate for either too high or too low a rate setting,” Lise Bergmann, a housing market economist at Nordea, said in an interview this month.

Bonds financing the cheapest Danish home loans with annual rate adjustments yield less than 1 percent. The average interest rate paid on all loans was 3.314 percent in May, down from 3.324 percent in April, the central bank said June 28. Taking tax deductions and inflation into account, the interest rate paid by most households was 0.06 percent, according to the Danish Mortgage Bankers Federation.

“It is paramount for us that all market participants have full confidence in the reference rates we use,” Horwitz said. “That’s all we care about.”

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.