* Some banks suspected Nibor rigging last year
* Investigation was inconclusive, followed Libor/Euribor
* Reforms suggested by central bank are insufficient
* Central bank says cannot explain some deviations in Nibor
By Gwladys Fouche
OSLO, July 4 Proposed central bank reforms to
Norway's Nibor interbank lending rate will not eliminate the
risk of manipulation, finance industry critics argue, saying the
mechanism still lacks transparency and the panel that sets the
benchmark is too small.
Norway promised reforms of the Norwegian Interbank Offered
Rate last year after some foreign banks complained about
After investigating, the banking regulator said it found no
evidence of rate-rigging but could not rule it out either.
That evoked unwelcome comparisons with the scandal that led
to some of the world's biggest banks being fined $6 billion for
rigging the London Interbank Offered Rate (Libor) and its
European counterpart Euribor.
Norway introduced new rules for Nibor - which sets
parameters on a range of financial instruments including bonds -
last autumn, including the creation of a control committee.
Additional measures have been under consideration since
In a letter to the Norwegian financial regulator published
in early June, Norges Bank said regulations needed to be changed
as soon as possible "to make Nibor more robust and create more
trust than it does today".
But the central bank suggested no concrete measures,
something critics says it needs to rectify.
"All the suggestions were sensible but they did not go far
enough because ... they (the central bank) did not suggest or
signal any instrument to enforce it," Knut Anton Mork, chief
economist at Handelsbanken in Oslo, told Reuters.
"They have some instruments they can use if they want to.
For example, they could require banks to follow their
recommendations for changing the Nibor routines in return for
access to central bank funding."
One of his main concerns is whether Nibor, which is set by a
panel of six banks - DNB, SEB, Danske
, Nordea, Swedbank and Mork's
employer Handelsbanken - is still at risk of
"Norges Bank actually points to cases that they claim to
have found were deviating quotes, fixes from individual banks
that were enough to change Nibor materially on a given day," he
"They did not find any market reasons. Obviously that is
None of the six Nibor-setting banks were implicated in the
Libor and Euribor scandals.
Another economist said the number of banks on the Nibor
panel should be increased.
"There are few banks that are contributing to the Nibor and
so one single bank can affect the quote," said Kyrre Aamdal, a
senior economist at DNB, one of the banks that is part of that
"There is a problem with the number of banks on the panel,
it is small. I don't think they have any measures that would
increase the number of banks on the panel," he told Reuters.
Another concern, shared by the central bank, is that Nibor
is not a quotation of rates in crowns, but works via the
eurodollar market and is then converted into crowns. Banks argue
this is necessary because if Nibor was quoted in crowns, it
would not be liquid enough.
"I feel it clouds the transparency of the Nibor market,"
said Handelsbanken's Mork. The issue of liquidity, he argues, is
linked to the fact that most small banks, for historical
reasons, use DNB as their settlement bank. If they relied on
Nibor instead, concerns over liquidity would be less acute.
The finance ministry is conducting a review of the potential
Nibor reforms that is due to conclude on Aug. 4.
(Editing by John Stonestreet)