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It has been somewhat surprising to witness the degree of repercussion #OpEuribor has had in media and social networks. On the one hand, it feels strange that this debate hasn’t happened earlier considering how serious it is. On the other, it is truly astonishing seeing how, in a matter of days, there are thousands of visits together with great activity on the internet and plenty of messages with similar experiences, collaboration offers, and -thank you so much- messages of support.
We find our investigation defining itself and taking shape through all the information and opinions we keep receiving, finding and analysing. Thus, it is only fair to update you and share all these conclusions, a well as clarifying and correcting some of the interpretations we find mistaken and dangerous.
Many people write to let us know the operations we are requesting can be found at Reuter’s or at EBF’s sites. We must clarify we are aware of those tables’ existence. However, we can only find final numbers there, and although they correspond, in theory, to the offered interest rate, we don’t know where they come from or whether actual interbank deposit transactions have actually occurred.
Let’s remember the normative itself establishes a legally strong definition for the index:
(Please note this is Spanish legislation. While European Euribor’s legal dispositions only require quotes from panel banks, Spanish law requires those quotes be based on real interbank transactions.)
«7. Yearly Interbank Reference. It is defined as the simple arithmetic average of each month’s banking days’ daily rates published by EBF for yearly deposit transactions in Euros and calculated from the offered price by a sample of similarly qualified panel banks for transactions among themselves (EURIBOR)». Circular n. 7/1999, June 29th (July 19th BOE ).
According to EBF itself, Euribor is composed by interest rates offered by panel banks obeying (that’s the way it should be anyway) to the price of money that those same banks establish in the interbank market. The objectivity and neutrality of Euribor’s calculation and publishing depends on a wide variety of actors and transactions with such offered interest rates.
However, what’s really important here are the transactions leading to that final result. Before Euribor, Bank of Spain’s legislation regulating the calculation method of Mibor (Spanish interbanking) specifically mentioned transactions between banking entities lending and borrowing amounts at an interest rate. When Euribor is introduced in 2000 the circular is modified by substituting one index for the other, without modifying the requisites relating to required transactions in order to guarantee objectivity and neutrality in its calculation.
The risk here is that if the interpretation is indeed of interest rates as offered, without real interbank market transactions, what we have is an interest rate -Euribor- based on a survey self-made by EBF banks. A survey is what determines an interest rate and the price of money in a market? What balance checks are there between the two parts signing a mortgage? Isn’t a survey subject to manipulation by members of the European Banking Federation? How can governmental organisations undertake an investigation of the calculation?
If the interbank market is effectively dry and the European Central Bank is dictating the price of money (the 1% banks pay), it is intolerable that individuals, small business or public administration pay outrageously high interest rates to those same banks. The index does not correspond with its real function.
Our research moves forward but the questions still remain on the table. We insist in our right to remain informed and comprehensively understand all mechanisms and processes intervening in the calculation of Euribor. We insist that it is an obligation of law and/or administrative authorities to investigate bank activities and to know and explain how public money is used in bank rescue packages and how those practices are affecting social wellbeing and justice.