COPENHAGEN (Reuters) – Denmark’s central bank said on Friday it would not be realistic to abandon the Copenhagen Interbank Offered Rate (CIBOR) because many loan contracts are linked to it though other supplementary rates could be helpful.
Cibor has been cast in doubt after the Libor interest rate rigging scandal in Britain, and Barclays Plc this week pulled out as a contributor to the Cibor which continues with seven rate-setting banks.
“Given the large amount of outstanding contracts, replacing Cibor is not realistic,” the Danish central bank, the Nationalbank, said in a brief email statement.
Dozens of interbank rates are set in financial centres around the world for a range of currencies, and are used as benchmarks to help set prices for home loans, credit cards and derivatives products.
The Cibor is a reference rate which, according to Nordea Bank, is the basis for about a fifth of home loans in Denmark.
The central bank last year said that the overnight rate Cita could be a useful supplement to Cibor.
“Conditional on sufficient turnover, we are still of the opinion that Cita would be a useful supplement to Cibor,” the Nationalbank said. “Other relevant supplements may also be considered.”
The Danish Bankers Association, which collects, calculates and publishes the Cibor daily, and Denmark’s minister for business and growth have launched an inquiry into the setting of the Cibor rate.
Business and Growth Minister Ole Sohn has called for some kind of public oversight of the Cibor.
“We have noted that the minister for business and growth will issue a report on Cibor and that some form of public control with Cibor will be put in place,” the central bank said. “For now, we will await the publication of this report.”
Bankers Association chief Jorgen Horwitz said on Thursday he believed the rate was accurate, but that it was decisive for the association that market participants and bank customers also had confidence in reference interest rates.
(Reporting by John Acher and Ole Mikkelsen; editing by Ron Askew)