Singapore’s monetary authority censured banks for trying to rig benchmark interest rates and ordered them to set aside as much as S$12 billion ($9.6 billion) at zero interest pending steps to improve internal controls.
ING Groep NV (INGA), Royal Bank of Scotland Group Plc (RBS) and UBS AG (UBSN) were among 20 banks at which 133 traders tried to manipulate the Singapore interbank offered rate, swap offered rates and currency benchmarks in the city-state, the Monetary Authority of Singapore said in a statement yesterday. The regulator said it will also make rigging key rates a criminal offense and bring supervision under its direct oversight.
Singapore, seeking to bolster its reputation as a major financial hub, is cracking down amid a widening global review of benchmarks. Bloomberg News reported this week traders manipulated key foreign-exchange rates in the $4.7 trillion-a-day currency market. Barclays Plc, UBS and RBS have been fined $2.5 billion over the past year for rigging Libor.
“It would be important for Singapore, in particular, to signal that business as usual isn’t going to be permitted,” said Andrew Verstein, a lecturer at Yale Law School in New Haven. “Singapore has a very strong reputation for being squeaky clean. It also has a reputation for being a very chummy place where everybody knows everybody.”
Nineteen firms were asked to post reserves ranging from S$100 million to S$1.2 billion -- depending on the severity of the attempts by their traders to manipulate rates -- for a year and will earn zero interest on that money, MAS said. Commerzbank AG was exempted from setting aside any money.
The banks have taken disciplinary action against the 133 traders found to have tried to rig the rates, with about three-quarters of them having resigned or been asked to leave their firms, MAS said. The traders who are still employed will be subject to disciplinary action, it said.
During the review of benchmarks set from 2007 to 2011, the central bank’s officials went through more than 100 million documents, according to MAS. The regulator didn’t make specific allegations against individual firms or produce evidence supporting its findings.
“While there was no conclusive finding the SIBOR, SOR and FX benchmarks were successfully manipulated, the traders’ conduct reflected a lack of professional ethics,” according to the statement from the central bank.
Sibor, used to price debt ranging from commercial term-loans to homeowners’ mortgages, is calculated daily on behalf of the Association of Banks in Singapore. For the local currency rate, a poll is conducted of the 11 contributing banks to ask how much it would cost to borrow Singapore dollars from each other for different periods from one month to 12 months. Some of the highest and lowest quotes are excluded, and the remaining are averaged and published at 11:30 a.m. in Singapore.
Singapore will be among the first countries to start using trading data rather than the survey of estimates in calculating benchmark rates, ABS and the Singapore Foreign Exchange Market Committee said in a separate statement. The new method will apply to four of the current 11 rates in the nation, while another four will be discontinued and two will be replaced with benchmarks from other markets, it said.
Local-currency Sibor, to which most Singapore mortgages are pegged, will continue to be based on the survey method to reflect interbank borrowing costs, according to the statement. The benchmark will be subject to regular reviews, it said. The U.S. dollar Sibor rate and Malaysian ringgit spot rates will be replaced with U.S. dollar-Libor and onshore ringgit spot rates.
The Singapore Foreign Exchange Market Committee, which aims to set industry standards and a code of conduct for currency traders, has 20 members including the Monetary Authority of Singapore and the nation’s sovereign wealth fund, as well as banks and asset management firms.
ING “fully cooperated” with the review in Singapore and has taken disciplinary actions against the “small number of individuals involved,” the Amsterdam-based bank said in an e-mailed statement yesterday. The firm will also take steps to improve procedures for submitting rates, monitor the processes and train staff, it said.
Bank of America Corp., BNP Paribas SA, Oversea-Chinese Banking Corp., Barclays, Credit Agricole, Credit Suisse AG, DBS Group Holdings Ltd. (DBS), Deutsche Bank AG, Standard Chartered Plc, United Overseas Bank Ltd. (UOB), Australia & New Zealand Banking Group Ltd. (ANZ), Citigroup Inc., JPMorgan Chase & Co., Macquarie Group Ltd. (MQG), HSBC Holdings Plc (HSBA) and Mitsubishi UFJ Financial Group Inc. (8306)’s Bank of Tokyo-Mitsubishi UFJ unit were among the banks named by MAS in the statement.
“The punishment meted out will provide a clear signal that manipulation and other forms of financial shenanigans, riggings and violations of the law will not be tolerated in a well-respected global financial center,” Joseph Cherian, director of the Centre of Asset Management Research & Investments at the National University of Singapore’s Business School, said by telephone yesterday.