Are banks rigging the CDOR at the Bank of Canada? Several weeks ago an action was launched in New York that has potentially large consequences in Canada. The case has received little coverage outside the National Observer. The plaintiff alleges that Canada’s big banks colluded in setting the overnight rate at the Bank of Canada (BOC), known as the CDOR, the Canadian Dollar Overnight Rate. That rate may partly be determined by those seeking to borrow from the BOC, if they collude. In Canada the six biggest banks really are the ‘market’, the market is not diverse and competitive.
This is potentially a much bigger issue for Canadians than the price fixing of bread loaves (where Loblaws and others have been implicated), but because it relates to the corridors of finance, and not our lunch pails, the press do not seem to investigate. Tweaking this rate can affect billions of dollars in transactions and holdings. Manipulations can save, or cost, huge sums to those doing business. The small investor and saver likely suffer. One implication is that bank profits benefit.
The National Observer article correctly references the manipulation of the LIBOR rate in London several years ago. Full story in the Guardian. That rate is similarly referenced in financial market contracts at banks, pension funds, and securities firms. That case did get some media attention and lead to court interventions and fines.
I like to represent credit unions as the ‘good guys’. There may be a role for credit unions to play to ensure Canadians are not being abused by the big banks.