Singapore’s censure of 20 banks for trying to rig benchmark interest rates will result in a “significant burden” on the lenders, Lawrence Wong, an acting minister and board member of the city’s central bank, said.
The Monetary Authority of Singapore last month ordered them to set aside as much as S$12 billion ($9.4 billion) at zero interest, pending steps to improve internal controls. ING Groep NV (INGA), Royal Bank of Scotland Group Plc and UBS AG (UBSN) were among the banks at which 133 traders tried to manipulate the Singapore interbank offered rate, swap offered rates and currency benchmarks in the city-state.
Singapore joins the U.S., U.K. and Japan in cracking down on alleged rate manipulation. Hong Kong’s central bank last month extended its probe of possible misconduct in setting the city’s benchmark interest rates following Singapore’s move.
“It’s not just us confronting it but many other regulators are confronting the same issue,” Wong said in Parliament today. “What we have done is enhance our governance” and oversight of the setting of the city’s key benchmark interest rates.
The global market for contracts tied to Singapore-dollar benchmarks is less than one-hundredth the size of the market for those based on the London interbank offered rate and European benchmark interest rates, he said.
Rigging key rates will be made a criminal offense and supervision will be brought under the Monetary Authority of Singapore’s direct oversight. While a few supervisors knew of the rigging attempts, the regulator didn’t find evidence that senior managers were aware, Wong said.
Banks will be required to report their progress to the authority on a quarterly basis, Wong said. If any of the banks fail to comply with the central bank’s directives, the authority could impose penalties including fines, he said.
Singapore ordered 19 firms 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. Commerzbank AG (CBK) was exempted from setting aside any money.
The banks have taken disciplinary action against traders found to have tried to rig 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 by their employers, the regulator said.
During a 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.