OSLO Aug 11 The way Norway sets its benchmark interbank lending rate is flawed and changes intended to make it more reliable have only partly succeeded, the central bank said on Monday.
Norway promised reforms of the Norwegian Interbank Offered Rate, or Nibor, last year after some foreign banks complained about suspected rigging. Finance Norway, the sector's interest group, has already made some changes.
Regulators found no evidence of wrongdoing but said rate-rigging could not be ruled out. That evoked comparisons with the rigging of the London Interbank Offered Rate, Libor, and its European counterpart, Euribor, that led to fines of $6 billion for some of the world's biggest banks.
"The Nibor rate is constructed in a way that implies that a foreign interest rate is converted to a Norwegian interest rate through the forward exchange market," the central bank said in a statement on Monday. "Such a design does not make Nibor very transparent and can undermine confidence in the reference rate."
The bank said Nibor should be based on an estimate of a pure crown rate required for loans between banks, possibly using forward rates, as neighbouring Sweden and Denmark do. The number of contributors to the rate might also be expanded, it said.
The definition of the reference rate needs to be made more precise, the bank said, and the people in charge of setting the rules for Nibor should not be people also quoting the benchmark.
Nibor is currently set by a panel of six banks, DNB , SEB, Danske, Nordea, Swedbank and Handelsbanken. (Reporting by Balazs Koranyi and Camilla Knudsen, editing by Terje Solsvik, Larry King)