CIBOR and CITA – Danish Reference Rates

Date 9 nov. 2012
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Based on the latest months’ public criticism of CIBOR, the Minister of Business and Growth published a report on this matter 4 September 2012 (Hereinafter the “Report”). This report suggests three initiatives to restore the faith in the reference rate system.



CIBOR is an abbreviation of “Copenhagen Interbank Offered Rate”. CIBOR was introduced in 1988 and has since then been a reference rate for the interest rate on certain unsecured loan types aimed at to companies and private persons. The CIBOR rate is based on reports from certain banks known as CIBOR fixers. The reports state which interest rate the banks are willing to grant loans at, for a period of no more than 12 months, to another bank, which based on the prevailing market conditions is considered as one of the most creditworthy banks. The reports are collected on a daily basis by the Danish Bankers Association and are published on their homepage. The reports are provided by Danske Bank, Deutsche Bank, Jyske Bank, Nordea Bank, Nykredit Bank, Spar Nord Bank and Sydbank. None of these banks are obligated to use the interest rate stated in their report.

CITA – the market-based Reference Rate

The first initiative in the Report is the introduction of a market-based reference rate. The criticism of CIBOR has particularly been concerned with the rate being determined based on estimates from the CIBOR fixers. Therefore, there was a potential risk of manipulation with CIBOR. The Ministry of Business and Growth aims to handle this weakness by establishing a new reference rate based on actual transactions, called CITA.


CITA is an abbreviation of “Copenhagen Interbank Tomorrow/Next Average”. The determination of the CITA rate is based on the actual loans in DKK at the day-to-day interest rate on the money market. The actual calculation is carried out by a varying number of banks’ reporting the previous day’s actual revenue and the weighted average rate. Subsequently, the Danish National Bank calculates the average rate weighted by revenue. The CITA rate is published daily by the Danish National Bank.


Impact on the Bank Customers

Together with the Danish Bankers Association, the Ministry of Business and Growth has agreed to introduce the CITA rate from 1 January 2013. The agreement states that the banks, no later than 1 July 2013, must be able to offer loans based on the CITA rate. Furthermore, current customers with CIBOR-based loans must be offered conversion to a CITA-based loan. Certain banks have announced that the customers must pay the expenses in connection with the conversion of the CIBOR-based loan into a CITA-based loan, as the old CIBOR loan must be discharged before the new CITA loan can be obtained.


Furthermore, the Ministry of Business and Growth, the Danish Mortgage Banks’ Federation and the Association of Danish Mortgage Banks have agreed that all mortgage banks, effective from 1 January 2014 at the latest, must also offer customers CITA-based mortgage loans if the mortgage banks normally offer money market-related mortgage loans. In addition, existing customers with CIBOR-based mortgage loans will be offered conversion to CITA-based mortgage loans.

Public Supervision of the Reference Rate

Previously, the Danish Financial Supervisory Authority has not been able to supervise the reference rate. Therefore, the Ministry of Business and Growth plans to introduce an amendment establishing a public supervisory authority – under the Danish FSA – monitoring the relevant reference rates. The Danish FSA will supervise the fixing of current, relevant reference rates, including CIBOR, CITA and SWAP, but this supervision may be expanded if new types of reference rates emerge.


The Danish FSA must ensure the probity of the reference rates; this was previously under the control of the banks themselves.

Examination of the internal Material in the Banks

In order to carry out an effective supervision of the reference rates, a bill will be prepared which will allow the Danish FSA to collect and examine relevant internal material from the banks. It is mentioned in the Report that relevant material for example will include logs, audit reports, internal memos and emails. The extensive powers granted to the Danish FSA are meant to ensure an effective supervision in future, but must at the same time provide the Danish FSA with a real opportunity to examine the issues regarding CIBOR up till today. The work of the Danish FSA will be subject to the applicable confidentiality rules, but ultimately, the findings of the Danish FSA may lead to notification to the Danish Competition Authority and/or the police.


Furthermore, the Report states that the Danish FSA must be equipped with sanctioning powers meant to ensure that banks comply with the guidelines for good governance of the reference rates. The Report states that the Danish FSA must be able to issue orders to the banks regarding changes to their reporting framework if it is found necessary in order to ensure that the reports are carried out on a safe basis.


If you have any questions or require additional information on the above, please contact Partner Claus Molbech Bendtsen (, Junior Associate Ted Rosenbaum ( or Trainee Rasmus Albrechtsen (


The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis for decisions or considerations.