BONN, Germany Feb 7 The boards of Germany's big lenders underestimated for too long the potential for manipulating inter-bank lending rates, which are at the heart of an international scandal, the head of German financial watchdog Bafin said.
"In the past, the banks considered the Libor and Euribor rate submissions as a process with little risk, which in retrospect was inappropriate," Elke Koenig told Reuters in an interview.
Bafin is part of a phalanx of international regulators investigating the scandal involving how banks set interest rates that are used as the benchmark for trillions of dollars in financial contracts around the world.
"We are not saying that banks should have made different decisions. You always know better in hindsight. The question is whether they reacted quickly enough once the problems became known, and whether they reached the right conclusions," Koenig said.
Barclays, UBS and Royal Bank of Scotland have paid billions of dollars in fines in the Libor case, while the investigation is continuing into more than a dozen banks and brokerage firms, including JP Morgan, Deutsche Bank and Citigroup.
The London interbank offered rate, known as Libor, and its euro equivalent, Euribor, underpin the rates on a vast array of loans, everything from home mortgages to credit cards.
The Bafin is in the process of evaluating the results of its investigations, with conclusions expected in the coming weeks.
"Special probes were launched in some cases," Koenig said.
"We are fully on schedule. The investigators have to do some follow up work on some of the reports," she said.
Koenig left open the extent to which bank board members would be held responsible for a lack of controls in interest rate setting procedures.
"It has been shown that there was manipulation in individual cases. One point of focus is whether this also occurred at German banks and if so, where the responsibility lies in a bank's hierarchy," she said.
Koenig said the German banks under investigation were cooperative and professional in their dealings with Bafin officials.
"No one is overjoyed when the Bafin starts a special investigation," she said. "Sometimes you think it should go a bit faster but we have no reason for complaint."