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Singapore punishes 20 banks for rigging interest rate benchmarks

Section: Daily Dispatches

Singapore Punishes 20 Banks in Rate Probe

By Brooke Masters
Financial Times, London
Friday, June 14, 2013

Singapore authorities have disciplined 20 banks after finding that 133 traders attempted to manipulate three kinds of interest rate and foreign exchange rate benchmarks, in a dramatic expansion of the global rate-rigging probe.

Royal Bank of Scotland, UBS, and ING were singled out for the toughest punishment by the Monetary Authority of Singapore, which said it took into account the number of traders involved as well as the seriousness and frequency of the manipulation attempts.

The MAS action marks the first time that 16 of the 20 banks have been sanctioned for rate-rigging and is the first to conclude that attempted rate-rigging occurred in FX benchmarks. RBS, UBS, Citigroup, and Barclays have previously been sanctioned in other countries for attempted manipultion of interbank rates.

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Rather than fining the institutions involved, the MAS ordered them to leave more money on deposit -- at zero interest -- with the central bank for one year. RBS, UBS, and ING were all ordered to increase their reserves by more than S$1 billionn ($799m), while Bank of America, BNP Paribas, and Oversea-Chinese Banking Corp., a local institution, were in the next tier down and were required to increase reserves by S$700-800 million.

While RBS and UBS have previously been fined by US and UK authorities for rigging Libor, the London Interbank offered rate, the other four banks have not been disciplined.

The MAS announced it was investigating Sibor, the Singapore version of the Libor, in July 2012 after Barclays became the first bank to pay fines to the UK and US for rigging interbank interest rates. The probe widened in September to include non-deliverable forwards, a kind of foreign exchange derivatives, and the swap offered rate (SOR), which represents the average cost of funds used by local banks for commercial lending.

All of the rates involved are calculated using estimates from panels of banks.

"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.

It said that three-quarters of the traders involved have left their banks and the rest have been or will be disciplined through reassignment or forfeited pay. It said there was no evidence that the manipulation attempts were criminal offences.

The MAS also proposed a new regulatory framework for the three benchmarks, including specific civil and criminal sanctions for rate-rigging and formal regulation of the rate-setting process. The proposals are in line with recommendations from the International Organisation of Securities Commissions and reforms put through in London after Barclays became the first bank to be sanctioned for Libor manipulation.

"Ensuring the integrity of the processes for setting financial benchmarks is vital. MAS has taken firm supervisory actions against the banks, based on a careful assessment of their respective deficiencies," Teo Swee Lian, deputy managing director of MAS, said in a statement.

ING said in a statement: "ING finds the inappropriate behaviour and lack of professional ethics found in the review unacceptable. Therefore it 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."

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 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 Ltd, Citibank, JPMorgan Chase Bank, Macquarie, Bank of Tokyo-Mitsubishi UFJ, HSBC, and Commerzbank.

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