SINGAPORE, Feb 18: Singapore’s central bank is expected to scrap its U.S. Dollar-linked interbank lending rate, according to a banker with knowledge of regulators’ reviews into the setting of interest rates following the Libor rate rigging scandal.
The Monetary Authority of Singapore ordered members of the Association of Banks in Singapore in July to review how they set their benchmark interbank lending rates, focusing on the Singapore interbank offer rate (Sibor) and the Swap Offer Rate (SOR).
The order came after U.S. And UK authorities uncovered widespread manipulation of the London interbank lending rate (Libor).
The banker said, in a text message exchange with Reuters, that as a result of those reviews the abolition of the U.S. Dollar Sibor was ‘likely’.
The MAS provided no new comment on the matter when contacted by Reuters. In December, the regulator said the reviews were ongoing and it was premature to speculate on their outcomes.
U.S. Dollar Sibor is a measure of the cost of borrowing U.S. Dollars in the Singapore interbank market, and is used to price loans made by Singapore banks in U.S. Dollars. Banks can use alternatives, like the U.S. Dollar Libor rate.
The more significant market in Singapore is the Singapore dollar Sibor, which is used as the reference price for many commercial and home loans in the city-state.
The MAS probe was extended in late September when the regulator said banks must also look at how rates for non-deliverable foreign exchange forwards are set.
Reuters reported last month that bank reviews found that NDF rates had been manipulated as well.
Singapore’s probe was similar to those launched by other regulators across the globe following last year’s Libor scandal, when U.S. And UK authorities unveiled widespread rigging of the London interbank rate, a benchmark used to price more than $500 trillion worth of contracts from derivatives to mortgage rates to credit cards.
U.S. And UK regulators have fined three banks to date – RBS, Barclays and UBS – a total of $2.6 billion for allowing traders to manipulate Libor interbank rates.
Bloomberg reported earlier on Monday that Singapore’s central bank was considering ending the city-state’s U.S. dollar-linked interbank lending rate. Citing an anonymous source, the report said members of the Singapore Foreign Exchange Market Committee in a Jan. 22 meeting examined the proposal during a discussion of MAS’s review of benchmark rates.
The group may instead use the U.S. Dollar London interbank offered rate, the article said, with changes expected by June.
Thomson Reuters, parent company of Reuters News, acts as the agent for the Association of Banks in Singapore, collecting and calculating the rates.
(AGENCIES)
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