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07 December 2013

Die Welt: BaFin wants bigger government role in setting market benchmarks

German banking watchdog BaFin is calling for far-reaching reforms in the setting of market benchmark values such as Libor, arguing for a more active government role.

Translated from the German

The European Commission has announced record fines for the illegal agreements of reference rates such as Libor between six international banks. The effects of the manipulations were felt widely: Interest rates are the basis for countless loans and other financial products. However, for the German financial watchdog BaFin these fines were not enough to ensure that such a thing would not happen again. BaFin called for a far-reaching reform of the tamper-prone reference prices in financial markets.

"Reference prices that are only based on more or less random estimates are not sound", Raimund Röseler, head of banking supervision at BaFin, told Welt am Sonntag in an interview. He did not trust the industry alone to identify reliably those reference rates at which financial contracts are based around the world. "The most relevant figures also need to be checked by a governmental body. It should not be left to the private sector alone", he added, "as the only way to ensure structures on which all participants could rely". BaFin has already provided banks with a list of requirements for how they are to reconfigure their reporting systems for reference prices. In these requirements, BaFin addresses fundamental principles like the four-eyes principle and the more complete documentation.

In addition to interest rates, banks have apparently manipulated various other reference rates worldwide. Regulators are investigating suspected cases in foreign currencies and for gold and silver prices. So far, there are no specific allegations against German banks, however. "Currently, there is no indication that German institutes participated in manipulation on the foreign exchange markets", Röseler said.

Full article (in German)

Further reporting © Reuters

© Die Welt

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