Singapore’s central bank plans to reprimand banks in the city-state as early as Friday following an 11-month review into how benchmark interest rates are set, five people with knowledge of the matter said.
The Singapore Foreign Exchange Market Committee, which includes the Monetary Authority of Singapore and banks, plans to separately announce changes to the rate-setting process on the same day, two of the people said yesterday, asking not to be identified before the announcements are made.
The island nation’s review into possible manipulation of the Singapore interbank offered rate follows a global crackdown on rigging of benchmark borrowing costs by banks and brokers. Barclays Plc, UBS AG and Royal Bank of Scotland Group Plc were fined $2.5 billion to settle claims with U.S. and U.K financial regulators. A British markets supervisor is considering opening a probe into potential manipulation in currency markets, another person briefed on the matter said.
“There is a sense that financial firms and markets have grown too big and fast, and have cut corners in virtually all countries,” Sandy Mehta, chief executive officer of investment advisory firm Value Investment Principals Ltd. in Hong Kong, said by telephone. “Everyone’s image has been tarnished as regulators are struggling to keep up with markets.”
Sibor, used to price debt ranging from commercial term-loans to home mortgages, is calculated on behalf of the Association of Banks in Singapore, based on submissions by banks including London-based Standard Chartered Plc, Singapore’s DBS Group Holdings Ltd. and New York-based JPMorgan Chase & Co. Edinburgh-based RBS last year withdrew from the panel.
Lenny Feder, chairman of the SFEMC and group head of financial markets at London-based Standard Chartered, didn’t return three calls to his mobile phone. John Lim, an external spokesman for the Association of Banks, declined to comment.
The monetary authority isn’t planning to impose criminal sanctions on the banks or any employees, said two of the people. MAS will probably require some of the banks to set aside funds as a deposit with the central bank for a period of time and strengthen their internal controls, two people said.
Members of the currency traders’ committee met on Jan. 22 to examine a proposal to end Singapore’s U.S. dollar-linked Sibor, a person with knowledge of the matter said in February. The central bank will probably announce changes to the benchmark rates and the process for setting them by the end of June, the person said at the time.
Singapore in September also expanded its review to include non-deliverable forwards, a derivative used by traders to speculate on the movement of currencies that are subject to domestic restrictions. UBS, based in Zurich, and RBS suspended at least three traders in Singapore as part of probes into the manipulation of those rates, two people with knowledge of the matter said in October.
Unlike foreign exchange forward contracts, where two parties agree to physically exchange currencies at a set rate at a specific date in the future, NDF traders settle the net position in U.S. dollars. Who pays and how much at the end of the contract is determined by reference to a fixing rate which in some jurisdictions is set, like Libor, by a survey of banks.
Australia & New Zealand Banking Group Ltd., which is among the banks submitting NDF rates in Singapore, has “fully cooperated” in the review by the central bank, Libby Armstrong, a Hong Kong-based spokeswoman for the bank, said in an e-mailed response to questions. “MAS will be releasing their findings shortly, at which time we will be able to comment further.”
At 17 other banks including Bank of America Corp., Credit Suisse Group AG, Barclays and Citigroup Inc., spokesmen and spokeswomen either declined to comment or didn’t immediately respond to e-mails and phone calls.