According to Financial Times , the sprawling global rate-rigging probe expanded dramatically on Friday as authorities in Singapore disciplined 20 banks and revealed that 133 traders tried to manipulate three interest rate and foreign exchange benchmarks.
While the US, UK and Japan have already cracked down on four banks for attempted rigging of the London and Tokyo interbank borrowing rates, the action by the Monetary Authority of Singapore ropes in 16 new institutions. It also alleges that the misbehaviour extended to indices used in the trading of foreign exchange.
The MAS singled out Royal Bank of Scotland, UBS and ING for the toughest punishment, but said that employees at all 20 banks improperly sought to influence key benchmarks to make money on derivatives.
Singapore, which lacks legal powers to fine institutions involved in alleged rate-rigging, ordered them to leave more money on deposit – at zero interest – with Singapore’s central bank for one year. RBS, UBS and ING were all ordered to increase their reserves by more than S$1bn ($799m), while Bank of America, BNP Paribas and Oversea-Chinese Banking Corporationwill have to increase reserves by S$700m-S$800m.
The MAS probe of the Singapore interbank lending rate, or Sibor, was sparked by last July’s revelation that Barclays paid US and UK fines for seeking to manipulate Libor, the much larger benchmark used for contracts worth $300tn worldwide. Singapore’s investigation widened in September to include non-deliverable forwards, which are traded by foreign exchange traders, and the swap offered rate (SOR) used for commercial lending.
“While there is no conclusive finding that Sibor, SOR and FX benchmarks were successfully manipulated, the traders’ conduct reflected a lack of professional ethics,” the MAS said in a statement.
All of the rates involved are calculated using estimates provided by banks. Such survey-based rates have been criticised by US regulators, who say they are too vulnerable to manipulation.
Three-quarters of the traders involved have left their banks while the rest have been or will be disciplined, the MAS said. It added that there was no evidence that the manipulation attempts were criminal offences.
The MAS also proposed a new regulatory framework for the three benchmarks, including formal regulation of rate setting with specific civil and criminal sanctions for rate-rigging attempts. “Ensuring the integrity of the processes for setting financial benchmarks is vital,” Teo Swee Lian, MAS deputy managing director, said in a statement. “MAS has taken firm supervisory actions against the banks, based on a careful assessment of their respective deficiencies.”
Singapore’s banking industry also announced a significant revamp of 11 rates. Six will no longer be calculated and four will shift to being based on market transactions. Only Sibor, the reference rate for most Singapore mortgages, will continue to be calculated by surveys.
ING said in a statement: “ING finds the inappropriate behaviour and lack of professional ethics found in the review unacceptable … [and] has taken disciplinary actions against the small number of individuals involved. Furthermore ING has taken and will take a number of actions to enhance our procedures for submitting rates.”
In separate statements, RBS and UBS said they were co-operating with the MAS and would comply with any measures related to the review.
All of the institutions sanctioned by the MAS were found to have “deficiencies in the governance, risk management, internal controls and surveillance systems” for their involvement in setting the benchmarks.
“The large number of banks involved suggests that there might be several more fines yet arising out of Libor manipulation, so the bad news for banks will keep on coming,” said Owen Watkins, a barrister with Lewis Silkin.
The other institutions sanctioned by the MAS include Barclays, Crédit Agricole, Credit Suisse, DBS, Deutsche Bank, Standard Chartered, United Overseas Bank, Australia and New Zealand Banking Group, Citibank, JPMorgan Chase Bank, Macquarie, Bank of Tokyo-Mitsubishi UFJ, HSBC and Commerzbank.
Article Source : Financial Times