BONN, Germany, Feb 7 (Reuters) - The boards of Germany's biglenders underestimated for too long the potential formanipulating inter-bank lending rates, which are at the heart ofan international scandal, the head of German financial watchdogBafin said.
"In the past, the banks considered the Libor and Euriborrate submissions as a process with little risk, which inretrospect was inappropriate," Elke Koenig told Reuters in aninterview.
Bafin is part of a phalanx of international regulatorsinvestigating the scandal involving how banks set interest ratesthat are used as the benchmark for trillions of dollars infinancial contracts around the world.
"We are not saying that banks should have made differentdecisions. You always know better in hindsight. The question iswhether they reacted quickly enough once the problems becameknown, and whether they reached the right conclusions," Koenigsaid.
Barclays, UBS and Royal Bank of Scotland have paid billions of dollars in fines in the Liborcase, while the investigation is continuing into more than adozen banks and brokerage firms, including JP Morgan,Deutsche Bank and Citigroup.
The London interbank offered rate, known as Libor, and itseuro equivalent, Euribor, underpin the rates on a vast array ofloans, everything from home mortgages to credit cards.
The Bafin is in the process of evaluating the results of itsinvestigations, with conclusions expected in the coming weeks.
"Special probes were launched in some cases," Koenig said.
"We are fully on schedule. The investigators have to do somefollow up work on some of the reports," she said.
Koenig left open the extent to which bank board memberswould be held responsible for a lack of controls in interestrate setting procedures.
"It has been shown that there was manipulation in individualcases. One point of focus is whether this also occurred atGerman banks and if so, where the responsibility lies in abank's hierarchy," she said.
Koenig said the German banks under investigation werecooperative and professional in their dealings with Bafinofficials.
"No one is overjoyed when the Bafin starts a specialinvestigation," she said. "Sometimes you think it should go abit faster but we have no reason for complaint."