Both inter-bank interest rate setters are subject to an antitrust investigation by the European Commission to examine whether there was collusion amongst member banks in an attempt to rig rates.
Barclays Bank was fined €373 million last month in separate UK proceedings after admitting that it attempted to manipulate the Libor and Euribor rates between 2005 and 2009.
The European Commission warned yesterday (25 July) that the EU could take over supervision of benchmarks such as Libor as it launched new market rules to clamp down on rate-fixing.
Begging to differ
But officials at the European Banking Federation (EBF), the body responsible for administering Euribor, have distanced themselves from the beleaguered Libor, saying that the composition of its bank panel (see background) make it structurally impossible that a cartel could have successfully colluded to fix the index.
Cédric Quéméner a director of Euribor-EBF, told EurActiv: “How many banks are under investigation? The number is around 18, of which only nine or so are also members of Euribor, meaning that the critical number required to possibly manipulate the [Euribor] rate is not reached.”
“If they did try to manipulate [Euribor] and did not succeed, it would be because of governance and the size of the panel,” Quéméner added.
EurActiv understands that Euribor also believes that the constitution of its larger panel of banks precludes collusion.
“It seems that the banks under investigation are investment banks, whereas the Euribor panel banks include Landesbanken, Greek banks, co-operative banks and some investment banks from different countries, with different strategies,” an industry source explained, speaking on condition of anonymity.
“If these banks were to convince each other that they want the same rate level, they would need to find at least another 15 different banks with the same interest as their own,” the source added.
A spokesman for the Commission said that the suggestion that Euribor was structurally incapable of being rigged was “pure speculation”.
Euribor’s attempt to distance itself from Libor follows a perception amongst European bankers that the scandal will impact the future of the industry in the City of London.
Heat from the US on City of London
“In future the banking community will have to offer what is known as 'a boring job', selling credit that they can genuinely guarantee, and I hope that this tangle will help give the banking industry a change,” the industry source said, adding: “The City of London’s way of banking is in an extremely difficult position and this is the legacy of the Libor story.”
The City, London's financial district, is also feeling the heat from EU and US regulators in the wake of the scandal.
EU Justice Commissioner Viviane Reding yesterday rapped the UK central bank for its failure to act on Libor despite warnings. Last week US Federal Reserve Chairman Ben Bernanke described the Libor system as “structurally flawed”, saying an international effort is needed to fix the problem.
A US government source told EurActiv on condition of anonymity that Washington was piqued by a perception that London was attempting to spread the Libor scandal further afield “as a diversionary tactic”.
Of divisions between Euribor and Libor, the industry source said: “When you are in the same boat with similar people and the weather is fine, no one seems as pleasant as your sailing companions, but when a tempest blows up you would do anything to survive.”