Banker contradicts Association of Banks in Singapore (ABS)

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ABS said the SIBOR setting mechanism is fine, there is no hanky panky.

Sibor system is robust, says bank association 05 July 12 The Business Times by Emilyn Yap <!--end post_info -->[SINGAPORE] The Association of Banks in Singapore (ABS) has strengthened governance around the Sibor and stands by the rate's credibility, even as the Libor-fixing scandal continues to unfold abroad.

"We have tightened as far as we can," ABS director Ong-Ang Ai Boon said yesterday. "It's highly unlikely anybody will rig this market."

Allegations of Libor (London Interbank Offered Rate) manipulation surfaced early last year, with regulators around the world investigating if banks colluded to set the rate.

The Libor is a key benchmark rate for trillions of dollars of financial products. Its movement affects how much parties pay under interest rate derivative contracts and other types of financial instruments.

The Libor is obtained through a trimming process. Each day, banks submit rates at which they think they can borrow from other banks. Thomson Reuters, on behalf of the British Bankers' Association, ranks the submissions and trims off the top and bottom 25 per cent. It then averages the remaining quotes to produce the Libor.

The Sibor (Singapore Interbank Offered Rate) is derived using a similar methodology.

In October last year when investigations were ongoing, ABS had beefed up an escalation process that flags unusual submissions, Mrs Ong said. For example, banks have to provide the contacts of relevant officers for ABS to call when there are odd submissions.

ABS also asked Thomson Reuters to come up with a system for tracking abnormal submissions. That process used to be manual.

According to Mrs Ong, though there may not be zero probability of Sibor manipulation, such a scenario is highly unlikely, because bank collusion here will be easier to detect. "It won't take too long for somebody to whistleblow ... The smaller the pool, the easier to tell."

Furthermore, the Sibor is a domestic rate with limited usage in international financial markets, she said.

Regulatory supervision in Singapore is strict. "We are aware of how important it is for Singapore to maintain its integrity, its credibility," she added.

For the Singapore-dollar Sibor, 15 banks provide submissions. They include the three local banks and foreign players, such as Bank of America and Credit Suisse. The contributing banks must have a minimum rating of 'A' from at least one credit rating agency and the ABS council has to endorse them.

In the UK, Barclays received a fine last week for its involvement in Libor manipulation but ABS has been tightening controls in the course of investigations, Mrs Ong said. "We make sure our doors are closed before the horses run out."

 

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Former banker said SOR was manipulated.

Ex-RBS man gives Libor setting a S'pore twist Business Times

<label for="headlines_source_publication_date">Date</label>
23 Aug 2012

<label for="headlines_author">Author</label>
Grace Leong

[SINGAPORE] A lawsuit by a former division head has cast the spotlight on the Royal Bank of Scotland's (RBS) practices in setting the London Interbank Offered Rate (Libor).
Tan Chi Min, former head of RBS's global banking and marketing division in Singapore, sued the bank in the High Court, alleging he was wrongfully fired for alleged gross misconduct related to the setting of Libor for the Japanese yen, in order to deflect the bank's responsibility over the Libor affair.
He is seeking to recover bonuses amounting to S$747,533 and 71 million yen (S$xx million), and 3.3 million RBS shares.
RBS, along with UBS, Lloyds Banking Group and Deutsche Bank, is being investigated by regulators in Europe, Asia and the US over their role in setting the Libor.
Coming in the wake of the widening Libor rigging scandal, Mr Tan's action has also raised questions about how Singapore Swap Offer Rates (SOR) are fixed by the bank.
In court documents last week, Mr Tan alleged RBS omitted critical information from records of a disciplinary hearing in September 2011 that allegedly showed the bank "condoned the practice of making requests of (its Libor) rate setters" and which also raised questions over its practices relating to the setting of SOR.
According to Mr Tan, the minutes allegedly failed to reflect the fact that he had referred to an extract where an RBS trader had referred to the setting of the Singapore SOR.
Last month, the Monetary Authority of Singapore (MAS) ordered banks in Singapore to review the way the Singapore Interbank Offered Rate (Sibor) and the SOR - two main benchmarks used to determine mortgage loans in Singapore - are set, as regulators worldwide step up investigations of more than a dozen banks in the United States, Britain and Japan over allegations of interbank rate manipulation.
RBS, which had informed the Association of Banks in Singapore (ABS) in April that it would stop contributing to the setting of Sibor with effect from May 31, told BT yesterday that it will still cooperate with MAS on the review.
RBS also said it will continue to "cooperate fully with ongoing investigations relating to the setting of Libor and other interest rates".
An RBS spokeswoman said Mr Tan's lawsuit was not a factor in its decision to quit its role in setting Sibor.
In January, the bank had announced that decision was the result of a global strategic business review. "During the course of this review, we have decided to withdraw from some interbank rate setting panels, but we remain committed to those markets. This included a decision to end our contribution to the rate setting panel for Sibor in Singapore," she said.
Mr Tan, who is represented by Suresh Nair and N Sreenivasan of Straits Law Practice LLC, said the minutes of his disciplinary hearing failed to reflect that he had raised the issue of RBS's "internal procedure in London" about setting Libor.
He said the minutes failed to reflect discussions relating to a Bloomberg chat on March 27, 2008, in which a former RBS manager had reported that a junior trader had been asked to "put (Libor) low".
RBS, in its defence papers, however, said it was entitled to fire Mr Tan because he was guilty of "gross misconduct", and had tried to improperly influence RBS's rate setters from 2007 to 2011 to submit Libor rates at particular levels to boost profits.
But Mr Tan argued "the practice of making requests to rate setters was common ... and known to the bank's management." In fact, input or views on various short term interbank rates including SOR, Yen Tibor (Tokyo interbank offer rate), Yen and USD Libor, were provided either orally or in writing by many of RBS's traders and managers to various interest rate setting bodies, he said.
In court documents, Mr Tan noted that another former RBS Swiss franc trader, was terminated allegedly for "improperly (seeking) to influence the rate setter."
Citing the bank's interim results released on Aug 3, the RBS spokeswoman confirmed that it has "dismissed a number of employees for misconduct as a result of its investigations into the setting of LIBOR and other interest rates."
But she declined to specify the number of employees who were terminated.
Mr Tan also claimed RBS, one of 16 that help the British Bankers' Association set Libor rates, failed to detail the allegations against him, or state precisely what policy, rule or law he allegedly breached that amounted to improper influence of the bank's rate setter.
But RBS disagreed, citing an Aug 29, 2011, letter it says is "fully compliant with the procedure set out in the Disciplinary Policy and provides details" of its allegations against Mr Tan.
RBS, in court documents, said Mr Tan's duties and the standards required of him in discharging those duties are set out in RBS's employment contract and Code of Conduct.
"We consider that your contribution to such communications is evidence of potential wrongdoing by you, which the bank considers could amount to gross misconduct under the bank's disciplinary policy," RBS said in the Aug 29 letter.
But Mr Tan disagreed, saying RBS failed to properly investigate allegations against him prior to launching formal disciplinary proceedings. For instance, RBS's disciplinary manager appeared to be unaware of the "fraud theft and dishonesty" allegations against Mr Tan in the Aug 29 letter, he said.
Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

 

[ionzu]

let this be a warning to all local bankers employed by foreign banks: your head will roll before the banks'