SINGAPORE — Manipulation of the Singapore Interbank Offered Rate (SIBOR) or the Swap Offer Rate (SOR), key benchmarks in the pricing of loans, including most mortgages here, could soon result in criminal sanctions under legislation proposed by the Monetary Authority of Singapore (MAS).

“Financial benchmarks play an important role in the functioning of the financial system. The proposed regulatory framework will deter manipulation of financial benchmarks and enhance the integrity of benchmarks set in Singapore,” said MAS assistant managing director Lee Boon Ngiap yesterday, as the central bank released a consultation paper on the proposed legislation.

The move comes a year after the MAS censured 20 banks in Singapore for trying to manipulate benchmark rates and ordered 19 of them to set aside reserves with the central bank — ranging from S$100 million to as much as S$1.2 billion each. The MAS found that 133 traders in the banks had tried to rig SIBOR, SOR, as well as foreign exchange benchmarks, although there was no conclusive finding that those attempts had succeeded.

Taking into account year-long feedback received on policy proposals to regulate the setting of financial benchmark rates, the MAS said the proposed legislation will comprise two key thrusts.

First, the manipulation of any financial benchmark in Singapore will be made liable to criminal and civil sanctions under the Securities and Futures Act. This will apply to acts of manipulation occurring in Singapore and those involving financial benchmarks administered in Singapore, the MAS said.

Second, the administrators and submitters of financial benchmarks designated by the MAS will be subject to regulation, including licensing requirements. The central bank will designate key financial benchmarks, based on their systemic importance and susceptibility to manipulation, and intends to begin by placing SIBOR and SOR under the regime.

However, it is not proposing the regime yet for foreign exchange benchmarks used in Singapore to price derivatives known as non-deliverable forwards. The MAS consultation on the new rules will run until Aug 29.

The proposed legislation is in line with similar moves taken by regulators in other major financial centres.

In the United Kingdom, traders who manipulate currency rates will face criminal charges under planned legislation in a crackdown on rogue bankers. The British government is also seeking to impose long jail terms on those found guilty of manipulating the London Interbank Offered Rate (LIBOR) and other gauges used in financial and commodity markets.

Yesterday, the Lloyds Banking Group agreed to pay £226 million in fines and settlements to the UK and United States governments after its traders were found to have manipulated key benchmarks. It is the fifth-biggest of the seven firms to reach settlements with regulators.

UBS paid the highest fines and settlements at US$1.5 billion (S$1.86 billion), including a deal with Swiss regulators, while Barclays, the first to settle, paid US$451 million, data compiled by Bloomberg showed. WITH AGENCIES