* Deutsche, Portigon under Euribor investigation-sources
* Deutsche Bank Euribor probe follows Libor special probe
* Bafin probes four banks over Euribor manipulation-paper
By Jonathan Gould
FRANKFURT, Jan 28 German financial watchdog
Bafin has escalated an investigation launched last year into
possible manipulation of the euro interbank offered rate
(Euribor) to include a special probe of German banks, a
spokesman said on Monday.
Bafin began checking Euribor interest rate-setting
procedures at banks last year in the wake of an investigation by
international regulators into possible manipulation of another
key interest rate, the London interbank offered rate (Libor).
Euribor and Libor, both based on estimates by large banks of
how much they believe they have to pay to borrow from each
other, are used as benchmark rates for trillions of dollars in
contracts, from Spanish home mortgages to derivatives.
As the credit crisis intensified between 2006 and 2008,
allegations started mounting that Libor no longer reflected the
real rate banks were paying for funds.
Authorities have been examining whether traders tried to
influence the rate to profit on bets on the direction it would
An escalation to a 'special probe' by Bafin, which has been
looking at how banks organise Euribor desks and whether
risk-management was adequate, entails intensified scrutiny of a
bank to include on-site inspections by Bafin or external
"I cannot say how many banks or which banks are involved in
the special probe," the Bafin spokesman said, adding that more
than one bank was targeted.
German bank supervisors have been on site at the country's
flagship lender, Deutsche Bank, and Portigon
, the successor bank to former regional state-backed
lender WestLB, in connection with investigations into interest
rate manipulation, sources close to the lenders told Reuters.
Daily Sueddeutsche Zeitung newspaper reported on Monday that
four banks were targets of the special probe, including Deutsche
and Portigon. The paper did not identify the other lenders.
Deutsche and Portigon declined comment.
Deutsche Bank is already being subjected to a Bafin special
probe in connection with Libor.
The lender has said it is cooperating with investigations in
the United States and Europe in connection with setting rates
between 2005 and 2011.
Swiss bank UBS was fined a record $1.5 billion
last month for manipulating Libor interest rates, the latest in
a string of debacles.
Britain's Barclays Bank has paid a $450 million
fine and the Royal Bank of Scotland is expected to be
fined up to 500 million pounds ($800 million) for its part in
In July, Reuters reported that several banks under
investigation for suspected rigging of Euribor intensified
cooperation with EU antitrust regulators in the hope of lower
Bafin President Elke Koenig said last week that interest
rates based on banks' estimates were vulnerable to manipulation,
particularly at times when real transactions in the market place
-- which would normally serve as a guide --- dry up.
Regulators needed to work not just on reforming the
benchmark interest rate system but also on replacing it, Koenig
More than 40 banks contribute to the Euribor inter-bank
lending rate, but the Euribor-EBF group running it warned
recently that more banks could leave following recent bad
Earlier this month German bank BayernLB said it
has withdrawn from the Euribor panel, effective at the start of
2013, citing "strategic reasons".