Bafin Reviews German Banks’ Role in ISDAfix Rigging CaseKarin Matussek
German financial regulator Bafin is reviewing whether the country’s banks may have participated in manipulating a benchmark for interest-rate derivatives.
Bafin is in contact with the German lenders taking part in the ISDAfix benchmark, Ben Fischer, a spokesman for the regulator, said in an interview today. So far, Bafin hasn’t found any indication that German banks were involved in manipulation, he said.
According to the International Swaps and Derivatives Association’s website, Deutsche Bank AG, Commerzbank AG and UniCredit SpA’s HypoVereinsbank unit are contributors to ISDAfix euro rates.
The Commodity Futures Trading Commission is probing Wall Street banks over the issue, people familiar with the matter said in April. The U.S. investigators uncovered evidence that banks reaped millions of dollars in trading profits at the expense of companies and pension funds by manipulating the benchmark, according to a person with knowledge of the matter.
Christian Streckert, a spokesman for Deutsche Bank, Nils Happich, a spokesman for Commerzbank, and Claudia Bresgen, a spokeswoman for HypoVereinsbank, all declined to comment.
The International Swaps and Derivatives Association created ISDAfix in 1998 along with the predecessors of Thomson Reuters Corp. and ICAP Plc.
The benchmark is used to value derivatives trades known as swaptions, which are options on rate swaps. The contracts give the holder the right to swap a fixed- for a floating-rate obligation at some future point at a predetermined level. The amount of derivatives underlying swaptions contracts outstanding as of July 26 totaled $29.5 trillion, according to the Depository Trust & Clearing Corp.
ISDAfix rates also help determine everything from borrowing costs on bonds that finance skyscrapers to interest on annuities. The benchmark, set in five currencies, is used to price euro-denominated corporate bonds and $550 billion of securities tied to commercial real estate. Fluctuations help determine the performance of structured notes bought by wealthy individuals.
The U.K. Financial Conduct Authority is reviewing how ISDAfix swaps prices are set in British pounds, and is working with the CFTC on the issue, two people familiar with the matter said in April.
The ISDAfix rates are distributed by Thomson Reuters, Telekurs and Bloomberg LP, the parent of Bloomberg News, according to ISDA’s website. Bloomberg competes with ICAP in some businesses, including foreign-exchange and swaps trading.