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‘Appropriate action’ taken in probe into rate-rigging

SINGAPORE — The action taken by the Monetary Authority of Singapore (MAS) against banks whose traders tried to rig benchmark interest rates is appropriate and comparable to the way regulators elsewhere have dealt with similar situations, said Acting Minister for Culture, Community and Youth Lawrence Wong.

SINGAPORE — The action taken by the Monetary Authority of Singapore (MAS) against banks whose traders tried to rig benchmark interest rates is appropriate and comparable to the way regulators elsewhere have dealt with similar situations, said Acting Minister for Culture, Community and Youth Lawrence Wong.

Nevertheless, an enhanced regulatory framework is in the pipeline to ensure that a similar situation cannot be repeated, he said in Parliament yesterday.

A review concluded by the MAS last month found hundreds of attempts by 133 traders at 20 banks to manipulate benchmark interest rates, including the Singapore Interbank Offered Rate.

There was no conclusive evidence to indicate that any attempts were successful, but the MAS has ordered the banks involved to set aside additional statutory reserves of up to S$1.2 billion for a year at zero interest while they put in place measures to address deficiencies in their operations, noted Mr Wong, who is also a board member of the MAS.

But, given the severity of what happened, this is just “a light tap on the hand” and the banks will “hardly feel a pinch”, said Jurong GRC Member of Parliament Ang Wei Neng, who asked whether they should also be fined.

Mr Wong said posting the additional reserves “will impose a significant burden on the banks”. He added that the MAS was unable to impose specific fines as “we do not regulate rate-setting activities today, neither do any jurisdictions”.

In response to a question about whether senior bank staff knew about what was happening, he said “a few line managers were aware of attempts to inappropriately influence benchmark submissions”.

However, regulators did not find evidence that the top management were aware of their traders’ misconduct. Indeed, senior management took the MAS review seriously and cooperated fully, said Mr Wong.

He also revealed that five cases of attempted rate manipulation were referred to the Commercial Affairs Department but no further action was taken as there was insufficient evidence to prosecute under existing criminal laws.

Mr Wong added that “our (current) regulatory frameworks do not provide for specific criminal or civil sanctions for the manipulation of such benchmarks. This is also the case in many other countries”.

But, going forward, the MAS will close the gaps and tighten oversight on key financial benchmarks. A new regulatory framework has been released for public consultation and may be implemented later this year, it said last month.

Meanwhile, all the traders found to have attempted to manipulate rates have been subjected to disciplinary actions by their employers, said Mr Wong, and a reference check system is in place to reveal their identities to future employers.

The Association of Banks in Singapore has also introduced enhancements to rate-setting processes. Certain rates have been scrapped, while others will be calculated based on actual trade instead of surveys.

Such changes are not common globally, noted West Coast GRC MP Foo Mee Har, who asked how local interest rates will be affected at times of high market volatility, which typically reduces trade volume and liquidity.

“That’s something that we will have to monitor — the principle of relying on actual instead of surveyed rates … But it’s something that we’ll have to evolve as we go forward, and it’s an issue that many other regulators are looking at,” said Mr Wong.

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