The Monetary Authority of Singapore (MAS) report, which brought to light attempts to rig the way in which crucial interest rates are set here, shows how widespread the rot is. The MAS review was prompted by the disclosure last year that the Libor rate in Britain had been manipulated by traders at banks. The Hong Kong authorities are probing similar misconduct involving HSBC and other banks.
Investigations here centred on how the Singapore dollar interest rate benchmarks, including the Singapore Interbank Offered Rates (Sibor), were set. Twenty banks - with 133 errant traders among them - were censured, and no fewer than 19 of them were told to set aside extra reserves with the MAS at zero interest for a year. This gesture makes the displeasure of the regulatory authorities clear, but it will have but a small impact on the bottom lines of local banks.
While no conclusive proof emerged of the rates being successfully manipulated, it was clear that there had been a grievous breach of professional ethics. The revelation that about three-fourths of the 133 traders cited have resigned or been sacked - and that the rest have been sanctioned with demotions and lost bonuses - should go some way towards assuring consumers that banks take the lapse seriously. But that is after the act. The law needs to be tightened to prevent malpractices. The proposed new regulatory framework for financial benchmarks should help to protect both customers and Singapore's reputation as a financial centre. The introduction of specific criminal and civil sanctions under the Securities and Futures Act for manipulation of any financial benchmark would provide for penalties that are absent now. Also, the MAS intends to subject the setting of key financial benchmarks to regulatory oversight. This will provide a layer of protection even before the legal penalties kick in.
Such moves do not come a moment too soon. The global banking system is infected with a penchant for greed and risk that would have been unthinkable in professions such as medicine and architecture. The breathtaking hubris of adventurous bankers contributed to bringing the international financial system almost to its knees in the 2008 crisis. Yet, wild risk-taking appears to be so ingrained and endemic among fat-cat bankers who walk off with million-dollar bonuses, that many do not appear to understand just how deeply the tide of popular opinion is turning against them.The latest indication of this mood is the British proposal that could make bankers who are reckless with customers' or taxpayers' money face criminal charges and have bonuses and pensions clawed back. Singapore must avoid banking extremism too.
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