Parliamentary Replies
Published Date: 09 July 2013

Reply to Parliamentary Question on Financial Benchmark

QUESTION NUMBERS 1241, 1246, 1270 AND 1275

NOTICE PAPER NOS. 227, 229, 238 and 242 of 2013


Date: For Parliament Sitting on 9 July 2013 

Name and Constituency of Member of Parliament

Q 1241. Ang Wei Neng, MP for Jurong GRC

Q 1246. Ms Foo Mee Har, MP for West Coast GRC

Q 1270. Yee Jenn Jong, NCMP:

Q 1275.  Asst Prof Tan Kheng Boon Eugene, NMP


Q 1241. To ask the Prime Minister (a) which bank has (i) the highest number of traders who tried and (ii) registered the highest number of attempts to rig the key financial rates between 2007 and 2011; (b) whether the banks' top management are aware of the attempts by their staff to rig the key financial rates; and (c) why MAS considered asking the banks to set aside extra reserves as a sufficient penalty for the banks.

Q 1246. To ask the Prime Minister (a) what is the impact on local interest rates and foreign exchange benchmarks resulting from the activities of the 133 traders found to have engaged in attempts to influence Singapore's financial benchmarks; (b) how does MAS determine the varying tiers of additional statutory reserves to be held by banks involved in the rate-setting scandal; and (c) how does MAS' supervisory action against the said banks, particularly the imposition of additional statutory reserves,  compare with other Central Banks' prescribed actions.

Q 1270. To ask the Prime Minister (a) whether the existing framework is insufficient to prevent the rigging of financial benchmarks by the 133 traders or to prosecute them; (b) how many of the cases are referred to the Attorney-General's Chambers and Criminal Investigation Department; (c) what inappropriate practices are uncovered; (d) what have the affected banks done to correct their deficiencies; and (e) what is the impact of the traders' actions on the market and consumers.

Q 1275. To ask the Prime Minister whether our criminal and banking laws are sufficiently comprehensive to prosecute the 133 traders found to have engaged in attempts to rig Singapore's financial benchmarks; (b) whether MAS will name these 133 traders and impose individual sanctions on them including suspending them from financial trading and other similar activities; and (c) whether the imposition of additional statutory reserves to be held by the affected banks is a proportionate sanction and a sufficient deterrent.

Answer by Mr Lawrence Wong, Acting Minister for Culture, Community and Youth on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in Charge of MAS:

Supervisory Actions

1   I thank Mr Ang Wei Neng, Ms Foo Mee Har, Mr Yee Jenn Jong and Asst Prof Eugene Tan for their questions on MAS’ supervisory actions against banks with regard to the attempts by some traders to influence the setting of local interest rate and foreign exchange benchmarks.

2   MAS carried out its review of the benchmark submission process, on an industry-wide basis, and calibrated its supervisory actions against all twenty banks, taking into account three factors: the number of traders within the bank who attempted to inappropriately influence the benchmarks, the number of banks with which the traders had collaborated, and the number of times these attempts occurred.

3   MAS has censured the banks involved and directed them to adopt measures to address their deficiencies. The banks must report their progress to MAS on a quarterly basis, and conduct independent reviews to ensure the robustness of their remedial measures. The banks have started implementing the remedial actions as directed by MAS. Nineteen banks have also been required to set aside additional statutory reserves with MAS for a period of one year.

4   The imposition of additional statutory reserves represents a financial cost to the banks, in terms of the borrowing cost or the income foregone as they would have to place these reserves with the MAS at zero interest. In considering the level of additional statutory reserves to be imposed on the banks, MAS had taken into consideration the amount of penalties imposed by other regulators for deficiencies in the setting of the LIBOR and EURIBOR benchmarks. However, MAS also took into account the smaller size of our financial markets compared to those in the major economies. For example, the estimated contracts size referenced to Singapore dollar benchmarks is less than 0.2% of that which is referenced to LIBOR.

5   The additional statutory reserves also serves as an incentive for the banks to put in place the necessary control measures required by MAS. MAS may vary the duration that the additional statutory reserves are to be placed with MAS, depending on its assessment of whether the remedial measures put in place by each bank are adequate. If any of the banks fail to comply with MAS’ directives, MAS can impose other penalties, including fines.

Impact on Financial Markets and Consumers

6   Ms Foo and Mr Yee asked about the impact of the traders’ actions on financial markets and consumers. While the investigations found clear evidence of discussions and agreements to influence benchmark submissions, there was no conclusive finding that the traders had succeeded in manipulating the actual financial benchmarks, or that their attempts have had any unidirectional impact on the financial benchmarks applicable to consumers.

Disciplinary Actions
7   Asst Prof Tan asked if MAS would be taking any actions against the traders involved while Mr Ang asked if the banks’ senior management were aware of their traders’ misconduct. Mr Yee Jenn Jong also wanted to know the number of cases that MAS had referred to the Commercial Affairs Department (CAD) and the

Attorney-General’s Chambers (AGC).
8   While a few line managers were aware of attempts to inappropriately influence benchmark submissions, MAS did not find evidence that the banks’ senior management were aware of their traders’ misconduct. In fact, the banks’ senior management took the MAS-initiated review seriously and co-operated fully with MAS. Many banks dedicated substantial senior management time and financial resources to the review. 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.

9   Nevertheless, MAS takes a serious view of the inappropriate behaviour by the traders involved and has censured the banks’ senior management for failing to exercise proper governance and oversight and to institute robust rate submission controls and processes. 

10   While MAS has not named the line managers and traders involved nor imposed individual sanctions on them, all of them have been subject to disciplinary actions by their employers, including termination of employment, loss of bonuses, or demotions. The banking industry has also put in place measures to facilitate reference checks, so that an institution would be made aware if a potential hire had been implicated in attempts to inappropriately influence benchmarks.

11   MAS referred five cases to CAD for investigation. AGC and CAD considered whether any criminal offences were disclosed by such alleged manipulation of benchmarks. However, there was insufficient evidence to support any prosecution based on our existing criminal laws.

Details of Review Findings

12   Mr Ang and Mr Yee asked for more details about what MAS uncovered in its review. MAS found twenty banks with deficiencies in their governance, risk management, internal controls, and surveillance systems relating to submissions of financial benchmarks1. These weaknesses allowed 133 traders to participate in attempts to inappropriately influence the submissions of financial benchmarks.

13   Financial supervisors internationally generally do not share detailed information about supervisory dealings with the financial institutions they regulate. Nonetheless, in this instance, MAS was of the view that it would be in the public interest to name the banks involved and to give an indication of the seriousness of the lapses in each bank, MAS therefore announced on 14 June the supervisory actions that it took against groups of banks.

Framework for Financial Benchmarks

14   Like other major jurisdictions, the setting of financial benchmarks is not a regulated financial activity. As financial benchmarks are typically developed by the industry in response to market needs, we have so far relied on industry self-governance of the activity. Hence our regulatory frameworks do not provide for specific criminal or civil sanctions for the manipulation of such benchmarks. This is also the case in many other countries, which do not have the regulatory powers to comprehensively penalise rate-fixing activity.

15   Going forward, however, in light of this and other recent experiences abroad, MAS will strengthen its regulatory powers and oversight of key financial benchmarks, including the SIBOR, SOR and FX Benchmarks. Legislation will be changed to prohibit the manipulation of any financial benchmarks and to introduce criminal and civil sanctions for such misconduct. Taken together, these changes will enhance the credibility of financial benchmarks in Singapore, and minimise the risk of benchmark manipulation. MAS is conducting a public consultation on the proposed regulatory framework and will finalise the framework taking into account feedback from the consultation as well as the evolving global regulatory standards.

16   Besides the MAS regulatory measures, the industry also has an important part to play in enhancing the robustness of these benchmarks. In this regard, the Association of Banks in Singapore (ABS) and The Singapore Foreign Exchange Markets Committee (SFEMC) have announced measures to improve the robustness of the benchmark rates. These measures include enhancing the governance framework for benchmark rates setting, and changing the methodology used to determine certain benchmark rates so as to place more reliance on actual transactions. MAS welcomes these new measures.


17   In sum, MAS has taken firm and appropriate supervisory actions against the banks, based on a careful assessment of their respective deficiencies. Its actions are proportionate to the scale of the misconduct uncovered, and reflect the smaller size of our markets. 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.  


1 MAS’ review covered the Singapore dollar interest rate benchmarks – the Singapore Interbank Offered Rates (SIBOR) and Swap Offered Rates (SOR) – and the Foreign Exchange spot benchmarks (FX Benchmarks) that are commonly used to settle Non-Deliverable Forward FX contracts, over the period from 2007 to 2011.