Why banks here weren't fined for rigging rates

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An honorable member of the Coffee Shop Has Just Posted the Following:

The Monetary Authority of Singapore (MAS) did not impose fines on the banks whose traders tried to rig financial benchmark rates because rate- setting today is not a regulated activity, Lawrence Wong, Acting Minister for Culture, Community and Youth, told Parliament yesterday.

An MAS board member himself, Mr Wong was responding on behalf of Deputy Prime Minister and MAS chairman Tharman Shanmugaratnam to a question raised by Member of Parliament Ang Wei Neng, who had asked whether MAS had been too lenient in its response to findings that there were clear attempts to manipulate rates.

Referring to the US$610 million fine imposed on Royal Bank of Scotland (RBS) by UK and US regulators for its traders' rigging of the London interbank offered rate (Libor), Mr Ang said the punishment meted by MAS here was "a light tap on the hand".

Mr Wong replied: "MAS is unable to impose a specific fine because . . . we do not regulate rate-setting activities today. Neither do many other jurisdictions."

He added that those that imposed fines for rigging rates did so not under financial regulations, but by relying on other legislation or regulatory measures.

On June 14, MAS released its findings that 133 traders had tried to rig benchmark rates and censured 20 banks for deficiencies in governance, risk management, internal controls and surveillance systems relating to benchmark submissions.

Instead of fining the banks, the central bank required them to set aside additional statutory reserves with it at zero interest for a year. The amounts were calibrated according to the severity of deficiencies, frequency of attempts and number of traders involved. RBS, along with UBS and ING Bank, made up the group of banks which ranked worst; each will have to put up $1 billion to $1.2 billion in additional statutory reserves with MAS.

Mr Wong said MAS had examined the penalties other regulators imposed for deficiencies in the setting of Libor and Euribor, and adjusted its actions in proportion to the scale of misconduct uncovered and to reflect Singapore's smaller market. "The estimated contract size referenced to Sing dollar benchmarks is only 0.17 per cent of the estimated size of contracts referenced to the Libor and Euribor benchmarks," he said.

These sanctions were taken at the bank level because the authorities did not find sufficient evidence to prosecute the individuals investigated for criminal wrongdoing. The banks did, however, take disciplinary action - firing, demoting or docking the bonuses of the traders involved.

MP Foo Mee Har raised concerns over the shift from the current survey method of determining benchmark rates, towards one that relies on actual trades - in particular what the impact on rates would be in a situation of high market volatility or tight liquidity.

Responding, Mr Wong said the principle of using actual rates had been internationally endorsed, but added that Ms Foo's concern over the impact on benchmark rates in times of high volatility or insufficient trades was valid and was "something that we'll have to monitor".

This is one reason the Singapore interbank offered rate (Sibor) will continue to rely on survey data. Even so, the Sibor system "will be more robust than it used to be", given measures announced by the Association of Banks in Singapore to enhance the governance framework for benchmark rate-setting and improve oversight, he said.


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