Deutsche Bank AG followed Barclays Plc in withdrawing from the Copenhagen interbank offered rate, leaving only six local lenders to fix the Danish benchmark that affects as much as $1.3 trillion in financial contracts.
Deutsche, which is one of a group of banks being probed over allegations it manipulated the London interbank offered rate, didn’t provide an explanation for its departure from the Cibor panel in the statement published by the Danish Bankers Association today.
“We would obviously prefer to have many, rather than few, participants providing Cibor rates,” Klaus Willerslev-Olsen, a deputy director at the bankers group, said by phone. “But after Deutsche Bank’s exit, we still feel the number is adequately high for us to provide a good rate.”
Barclays, which was fined 290 million pounds ($456 million) last year for its role in rigging Libor, stopped submitting bids for Cibor in August amid a global review of practices surrounding interbank rates. Denmark has since introduced a new rate it says better reflects market trends.
Denmark’s central bank handed over publication of Cibor to Nasdaq OMX Group Inc. in April 2011, saying it could no longer “assess the quality” of the rate. In a subsequent report, the central bank recommended supplementing Cibor with the so-called Cita rate, which is based on actual interest-rate swap agreements.
The Danish Bankers Association on Jan. 2 introduced its new money market reference rate, which is based on Copenhagen Interbank Tomorrow/Next interest-rate swaps. The rate will act as a supplement to Cibor.
“We’re waiting to see to what extent Cita will find broad usage,” Willerslev-Olsen said. “For the time being, it’s still Cibor which is being used for the majority of financial products.”
The panel of banks contributing to the new rate will be the same as those providing submissions for Cibor: Danske Bank A/S, Denmark’s largest lender, Jyske Bank A/S, Sydbank A/S, Nykredit A/S, Spar Nord Bank A/S and the Danish unit of Nordea Bank AB.
Cibor shows what banks say they are willing to lend at. Libor, in contrast, is the rate at which banks say they can borrow.