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
"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
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
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
"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."