Is LIBOR legal? Polish FSA translates

The first 9 December The Financial Stability Committee has championed this indicator, which affects the interest rate of thousands of loan agreements (KSF). the macroprudential supervision authority headed by the President of the National Bank of Poland (the committee also includes the Minister of Finance, the Chairman of the Polish Financial Supervision Authority, and the Head of the Bank Guarantee Fund), Beware of the wording and repetition of allegations about alleged irregularities in WIBOR’s preparation, which may become a source of System stability risks. Now, in an interview with money.pl, the Polish Financial Supervision Authority (KNF) is also defending WIBOR.

– WIBOR is the interest rate reference index It is solely based on transaction data embedded in Financial Market Facts. There are various groups of this data, some of which are processed using strictly defined statistical algorithm models – Bartos Jabarkiewicz, Director of the Department of Economic Analysis at the KNF Office, introduces us.

The rest of the article is under the video

The expert confirms that the index manager authorized by the Polish FSA is GPW Benchmark, and all The calculation of this indicator is carried out within the framework of the EU BMR regulation. It defines the rules for developing standards and the rules for supervising standards managers and the institutions that provide the necessary data for their calculation.

One of the arguments raised by some lawyers in the context of removing WIBOR from the loan agreement is the lack of interbank transactions, which are the basis for the development of the index. the correct?

As Gabarkiewicz points out, The basis of the WIBOR account is a series of data flowing to the administrator from ten banks, that meet the requirements of the BMR regulation (more on this later in the text). In the first place, the official takes into account interbank transactions of a deposit natureInterest-bearing and unsecured deposits.

According to the official, there are relatively few such deposit transactions: monthly, three or six months. Anonymous information about how many were made, the total amount and when they were completed can be verified in publicly available reports from the National Bank of Poland (NBP) and GPW Benchmark documents.

This is not the only data used to calculate WIBOR. Next, the money.pl interlocutor indicates – The administrator allows data on transactions concluded between banks and other large financial institutionsInsurance companies, brokerage houses, investment fund companies, etc. And then the bank that provides the administrator with the input data also takes it into account A group of transactions in markets related to the underlying market. We are talking about data about derivatives and currency transactions.

The last data set includes FRA transactions (Forward Price Agreement). These are forward-looking transactionsBecause it is used by financial institutions to hedge the risk of an increase or decrease in the interest rate in the future.

In the case of this type of transaction, the parties pay each other only the interest part, i.e. the difference between the interest rate values ​​(eg 6.7 and 6.8 percent) to which the transaction relates. This kind of transactional data, after being processed with statistical models, can also be used to calculate WIBOR – explains Gabarkiewicz.

Lawyers are skeptical manipulation of WIBOR. According to the EU MAR regulation, It is a prohibited act he is subject to (in accordance with the national provisions of the Law on Trading in Financial Instruments) A fine of up to PLN 5 million or imprisonment from 3 months to 5 years, or both.

Tampering with the indicator is highly unlikely since there are several security mechanisms in place on the part of the standards administrator and banks, which provide data for their calculation according to strictly defined rules and procedures. In our opinion, this mechanism is safe and there are no loopholes in it that would allow banks to manipulate the level of WIBOR, as an official of the Polish Financial Supervisory Authority confirms.

The point is that Manipulating the LIBOR standard (used for loans in Swiss francs and replaced by a new index – SARON) Installed in the UK for transactions from 2005-2010, and especially in 2008. The index level was affected in a way that led to its decrease. In the wake of these events came the European Union’s Regulation on Weapons of Mass Destruction, which aims to prevent this. Work on developing common procedures and rules for standards development began in 2013 and ended in 2016.

In what system do banks transfer data to the administrator?

– Data from the money market is delivered to the GPW Benchmark in an automated manner, so no one from the bank can manually control their content in any way. Individual banks/participants in commissions with other counterparty banks that provide data on transactions completed in the money market are not known. These measures make it impossible for banks to agree to provide input data – says Gabarkiewicz.

The situation is different in the case of data from the markets related to the money market. According to the KNF expert, before it is transferred to the administrator, it must be processed using strictly defined statistical and mathematical algorithms. confirm it Persons in individual banks responsible for transmitting this data are isolated from other departments by “Chinese walls”. This is?

These persons are unable to communicate with persons from other lines of business of the Bank, for whom the amount of WIBOR may be a source of income or loss. Therefore, a specific employee (in the terminology of the BMR regulation, the data provider is called – editor’s note) is always identified by name and is responsible for his actions in this regard, – explains the KNF official.

Moreover, it guarantees it GPW Benchmark is the only organization with access to the collected data, thus it is able to determine whether WIBOR is determined on a given day on the basis of transaction data from the money market or on the basis of transaction data from the relevant markets. So, according to a representative of the Polish Financial Supervisory Authority, banks cannot exchange information about the transmitted data.

The lawyer argued in an interview with money.pl recently that the conviction – that is, important evidence in the case against the bank – is written in professional language, which proves that the author is someone who has been professionally dealing with WIBOR for years.

ESMA refused to answer money.pl’s questions regarding the above notification. According to the findings of our editorial office, the Polish supervisory authority did not receive such notification regarding WIBOR: neither from the whistleblower nor from the EU supervisor. Gabarkiewicz claims The whistleblower recently described in the media uses concepts that predate the implementation of the WMD Regulationwhich was a few years ago.

Karolina Wisota, money.pl journalist

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