BaFin says banks must set aside rigging scandal cover
FRANKFURT, July 22 |
FRANKFURT, July 22 (Reuters) - Banks involved in the interest rate-rigging scandal would have to set aside provisions to cover potential damages stemming from ongoing investigations, the head of Germany's financial regulator BaFin told a magazine.
"We are currently trying to find out together with the UK and U.S. authorities to what extent German institutions were involved in the scandal," Elke Koenig said in an interview published by Der Spiegel on Sunday.
"Banks in general have to set aside adequate provisions for any damages eventually," she added.
More than a dozen banks are under investigation by authorities in Europe, Japan and the United States over the suspected rigging of the London interbank offered rate (LIBOR), a key interest rate used in contracts worth trillions of dollars globally.
Sources told Reuters last week that Deutsche Bank has obtained the status of being a witness for the prosecution and as a result may escape with a lighter penalty than other banks in Europe if investigators impose fines.
BaFin had initiated a special investigation into Deutsche Bank, a process which is more severe than a routine investigation initiated by a third party, sources said early this month.
BaFin had previously declined to comment specifically on whether it was probing Deutsche Bank but said it was looking into suspected manipulation of Libor rates by banks.
Koenig told Der Spiegel it would be worth looking into other ways of setting the Libor rates, adding that "real transactions", such as sovereign bonds' development, could be used as basis for computation.
She said the current system, which relies on unregulated estimates of rates that commercial banks submit regarding costs the banks incur when borrowing from each other, is open to manipulation.
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