Parliamentary Replies
Published Date: 10 September 2012

Reply to Parliamentary Question on Singapore Interbank Offered Rate (SIBOR) set by Singapore banks

Question No 564 & 585
Notice Paper No 261 & 271 of 2012
For Oral Answer

Date: For Parliament Sitting on 10 September 2012

Name and Constituency of Member of Parliament
Q 564. Dr Lily Neo, MP for Tanjong Pagar GRC: 


To ask the Prime Minister (a) how is the Singapore Interbank Offered Rate (SIBOR) set by Singapore banks; (b) whether the system is robust and whether it requires better governance; (c) what is the possibility of a SIBOR-rigging incident happening in Singapore; and (d) what is the impact of the London Interbank Offered Rate on financial institutions in Singapore.

Name and Constituency of Member of Parliament
Q 585. Ms Tan Su Shan, Nominated MP:


To ask the Prime Minister what is the Ministry's position on the appropriateness of the Singapore Interbank Offered Rate being used as a benchmark in the setting of loan pricing in Singapore.

Response by Mr Lawrence Wong, Senior Minister of State, Ministry of Education & Ministry of Information, Communications and the Arts on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in Charge of MAS 

1  The London Interbank Offered Rate or LIBOR is an important interest rate benchmark that is used by market participants globally, including in Singapore, to directly price financial products or indirectly as a reference when setting interest rates.  As an international financial centre, we host many global banks that trade and offer financial products that are referenced against LIBOR.  The process for setting the Singapore Interbank Offered Rate or SIBOR, is similar to that for  interbank offered rates in several other jurisdictions. The basic model for most jurisdictions has followed that for LIBOR, which is set by the British Bankers’ Association (BBA).   SIBOR is currently set by 12 participating banks, and published by the Association of Banks in Singapore (ABS).  Prior to 11.00 am every business day, each participating bank submits the interest rate at which it could borrow Singapore Dollars in the interbank market, at tenors ranging from 1 month to 12 months.  These rates are then collated and ranked. The middle two quartiles – the six submitted interest rates in the middle of the range – are then averaged to determine the official SIBOR. Hence the outliers, or the rates that are at the bottom and top end of the range, are not included in the computation of SIBOR. ABS publishes the SIBOR at 11.30am daily. 

2  As SIBOR is a measure of the cost of borrowing Singapore Dollars in the interbank market, banks have found it to be an appropriate benchmark to price their Singapore Dollar-denominated loans.  Such loans include commercial term loans and residential property loans.  Besides SIBOR, it is possible to peg contracts to other benchmarks of similar tenors, such as the Swap Offer Rate (SOR), central bank bills or government bills and bonds.  However, each benchmark will have its own unique characteristics. In 2009, ABS reviewed its rate setting procedures and adopted several improvements.  These included establishing a Financial Markets Committee to oversee the governance and procedures for daily rate setting; and establishing a minimum number of participating banks (12) and a minimum number of contributed rates for each daily setting (6). ABS also appointed an administrator to review the rates contributed by participating banks, including checking for consistent outliers and comparing with broker rates.

3  In line with the investigation into LIBOR, regulators in several jurisdictions are looking into how  key market interest rate benchmarks have been set by banks.  MAS is doing the same in Singapore, and has directed banks that are on the ABS’ rates contributing panels to conduct independent reviews to verify the integrity of their rate-submission processes.  Pending the completion of these reviews, it is premature to draw conclusions about the impact on financial institutions in Singapore.

4  MAS is also working with ABS and the Singapore Foreign Exchange Markets Committee (SFEMC) to review the SIBOR-setting process more fundamentally.  The review will  take into account what SIBOR is used for, how it can be strengthened, whether proposed changes are resilient to future changes in market structure, as well as the impact on the existing stock of contracts that are pegged to SIBOR.  We are mindful that any change will impact lenders and borrowers.  Other jurisdictions are also reviewing their benchmark setting processes, and we will study those closely too.