Banks' senior management 'in the dark'

SINGAPORE - The senior management of 20 banks recently implicated in the rigging of crucial financial rates were not aware of their traders' actions, said Monetary Authority of Singapore (MAS) board member Lawrence Wong yesterday.

Still, he told Parliament, the regulator took a serious view of the traders' inappropriate behaviour, and has taken "firm and appropriate" actions.

Among other things, MAS has censured the banks' senior management for failing to exercise proper governance and oversight, and to institute robust rate submission processes.

His comments were in response to MPs' questions following revelations last month that a year-long MAS review uncovered 133 traders from 20 banks who had tried to influence the setting of local interest rates and foreign exchange benchmarks.

This included the Singapore interbank offered rate (Sibor) that most home-loan rates are pegged against.

But there was no conclusive finding that the rates were successfully manipulated.

MAS has referred five cases of attempted rate rigging to the Commercial Affairs Department, said Mr Wong, but there was insufficient evidence to support any prosecution based on existing criminal laws.

He also noted that the banks' senior management took the MAS review seriously and cooperated fully. He said: "Their strong commitment to do the right thing showed that banks here believe in upholding the integrity of Singapore's banking system, its financial markets and its banking professionals."

He was responding to the House on behalf of Deputy Prime Minister Tharman Shanmugaratnam, who is also Finance Minister and MAS chairman.

In the wake of the findings, MAS has proposed a new regulatory framework for financial benchmarks. This includes criminalising attempts to rig such rates and subjecting the setting of several key benchmarks to regulatory oversight.

Mr Wong, who is also Acting Minister for Culture, Community and Youth, said MAS' actions on the banks were proportionate to the scale of the misconduct uncovered.

MAS has ordered 19 of the 20 banks to set aside extra reserves - ranging from $100 million to $1.2 billion each - with it at zero interest, depending on the severity of their traders' attempts to fix rates. Holland's ING, British RBS and Swiss giant UBS are putting aside the most, between $1 billion and $1.2 billion each.

Mr Wong said this represents a financial cost to the banks in terms of the borrowing cost or the income forgone.

He added: "MAS' prompt supervisory response, together with the enhancements to the regulatory framework for setting key financial benchmarks, will safeguard the credibility and reliability of such benchmarks set in Singapore."

alfoo@sph.com.sg

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