Japan’s banking regulator will seek to introduce penalties for manipulation of financial benchmarks, joining market watchdogs around the globe in pushing for broader authority and tougher supervision.
The Financial Services Agency should get formal authority to supervise organizations that set benchmarks such as the Tokyo Interbank Offered Rate, or Tibor, and to conduct investigations, an advisory committee to the regulator said in a statement yesterday. The FSA plans to submit a bill including the changes to parliament next year, an FSA official said at a news briefing, asking not to be identified, citing agency policy.
The recommendations sum up the work of the committee, formed last month to revamp the regulatory framework for Tibor and other benchmarks in line with international trends. Global fines on companies including Deutsche Bank AG and Royal Bank of Scotland Group Plc reached $6 billion this month, and other firms are under investigation around the world.
“Given the international trend, we fully understand that Japan needs to introduce a regulatory framework,” Kyosuke Hattori, a spokesman for the Japanese Bankers Association, which compiles the benchmark, said by phone. The planned change “can boost the market’s confidence in Tibor,” he said.
The FSA, which has already investigated some manipulation of rates under its mandate to police markets, should create a framework to inspect and supervise organizations that set rates, while introducing penalties against financial firms that manipulate data submissions, according to the statement.
In Japan, banks including the lending unit of Mitsubishi UFJ Financial Group Inc. (8306), the nation’s biggest lender, are responsible for submitting interbank offered rates to the Bankers Association. The lobby group then compiles the data and sets the benchmark, according to the group’s website.
The association pledged in July to step up oversight of Tibor, drawing up a code of conduct and possibly reducing the number of rates it calculates.
Market regulators are urging nations to comply with guidelines for financial-benchmark setting by July 2014 to prevent any repeat of manipulation that distorted the London interbank offered rate, known as Libor.
In response to the worldwide rigging probes, the International Organization of Securities Commissions has proposed a set of principles to “ensure the quality, integrity, continuity and reliability” of benchmarks, the Madrid-based group said in October.
Banks in the European Union risk fines as high as 10 percent of their yearly revenue for failing to set up adequate safeguards against benchmark rigging, under rules presented in September. Michel Barnier, the EU’s financial services chief, is also seeking to empower regulators so that they can require lenders to take part in some benchmark-setting panels.
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