Norway Considering New Reference Rate After Nibor Rigging Claims

Norway is seeking to bring the setting of market reference rates under government control and may create a new standard after the current benchmark interbank rate was subject to claims of manipulation.

“It’s especially important that the reference rate actually reflects the economic realities they are meant to reflect,” the Finance Ministry said in the letter to the Financial Supervisory Authority published on its website today. “It could be an advantage if new reference rates with other characteristics than Nibor are developed.”

Norway’s FSA in April recommended an overhaul of how Nibor is calculated after a probe into claims from bankers outside the country that the rate was being rigged. While the findings of the investigation were inconclusive, documents released by the central bank revealed complaints from traders stretching as far back as 2010.

In correspondence released in January, a June 2010 e-mail by a banker, whose name was blacked out, said Nibor fixings seemed “to bear no resemblance to market realities.” Interbank rates came under scrutiny after Barclays Plc was fined a record 290 million pounds ($450 million) in June last year for attempting to rig the London interbank offered rate and Euribor.

Nibor was linked to as much as 5.8 trillion kroner ($950 billion) in derivatives in April 2010, according to central bank documents. Nibor is used as a benchmark for mortgage rates, corporate bond yields and derivative contracts.

Bourse Oversight

It has been calculated as an average of rates published by a panel of banks for various maturities, excluding low and high quotes. That panel is made up of DNB ASA, Danske Bank A/S, Svenska Handelsbanken AB, Nordea Bank Norge ASA, SEB AB and Swedbank AB.

A draft set of rules for the setting of reference rates is due for submission by the end of March, while a separate study on the need for different rates and the possible establishment of new rates is due before the end of May, the ministry said.

Finance Norway, which represents banks in the country, is working on handing oversight and setting of Nibor to the stock exchange, it said on June 7. “It’s very important that there’s confidence in the rate domestically and internationally for well-functioning capital and fixed-income markets in Norway,” Bente Landsnes, head of the exchange, said at the time.

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