Libor Accusations Mirrored in Japan

The London Interbank Offered Rate (Libor) manipulation scandal involving UK banks has been echoed in Japan, where the country’s banks have been accused of operating a cartel in loan pricing.

Following the latest fine issued in the Libor saga, of £390m imposed on
RBS
, Japanese banks are under scrutiny after former derivatives trader Hideto ‘Eddy’ Takata accused them of keeping the Tokyo Interbank Lending Rate (Tibor) artificially high in order to inflate profits on lending to consumers and businesses. Takata, an experienced trader who worked for various investment banks until 2008, made his accusations ahead of the issue of a self-published book due to appear later this month.

According to press reports, the former trader has raised the rate manipulation issue in sympathy for his friend and former UBS trader, Roger Darin, who last year was charged by the US Department of Justice (DoJ) with conspiracy related to a probe into yen Libor manipulation.

Although Takata’s accusations have yet to be confirmed, it has been noted that Tibor rates have been significantly higher than yen Libor rates since the start of 2009, although the two rates should not differ that greatly – and indeed were very similar for a seven-year period to 2007 – as both are used as a reference for borrowing in the same currency.

A difference between Tibor and yen Libor occurred between 1997 and 1999, when Japan’s banking system was shaken by bankruptcies, but Takata argues that the Japanese banking system has been stable for several years and the discrepancy is no longer merited. “If Japanese banks need to borrow, they use Libor. If they are lending, they use Tibor. No other country has a double standard like this,” he commented. Five banks that submit lending rates to the Japanese Bankers’ Association have declined to comment on Takata’s charges.

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