Global interest rate-rigging crackdown escalates

A total of 133 traders at 20 global banks based in the U.S. or overseas attempted to manipulate foreign exchange and interest rate benchmarks in Singapore, the city-state's central bank said Friday as it disclosed the latest escalation of a global crackdown on suspected rate-rigging.
While there was no conclusive finding the traders improperly influenced the benchmarks relied on for trillions of dollars in transactions including commercial loans and mortgages, the Monetary Authority of Singapore said the group's "conduct reflected a lack of professional ethics."
About three-quarters of the traders have resigned or asked to leave their banks. The rest have been or will be subject to disciplinary action, including reassignments, demotions or bonus forfeitures. The central bank also referred some cases to Singapore's Commercial Affairs Department and Attorney-General's Chambers, but said no criminal offenses appeared to be involved.
"Although the number of traders involved represents a small proportion of the trading community in Singapore, MAS takes a serious view of the need to uphold high standards of integrity in the industry and expects banks to foster a culture of ethical conduct among all their employees," the central bank said.
The banks involved were cited for deficiencies in governance, risk management, internal controls and surveillance systems designed to guard against manipulation of the benchmark-setting processes. The central bank ordered them to post up to $959 million in increased statutory reserves at zero interest rates for one year. The banks must also address the lax systems.
The U.S.-headquartered banks sanctioned included Bank of America, Citibank and JPMorgan Chase, the central bank said. Dutch bank ING, Royal Bank of Scotland and Swiss banking giant UBS were required to post the highest reserve level. The central bank said the punishment was determined based on the severity of rate-rigging efforts by bank brokers and the number of attempts.
"Ensuring the integrity of the processes for setting financial benchmarks is vital. MAS has taken firm supervisory actions against the banks, based on a careful assessment of their respective deficiencies," said a statement issued by Teo Swee Lian, the central bank's deputy managing director.
The sanctions followed a year-long central bank review of benchmark-submission processes by the banks from 2007 to 2011. The review focused on the Singapore Interbank Offered Rate — which reflect rates at which banks would loan to each other — foreign currency exchange spot benchmarks and Swap Offered Rates.
The sanctions follow admissions of improper collusion in setting the London Interbank Offered Rate by Royal Bank of Scotland, UBS and London-based Barclays. Collectively, the three banks have been fined more than $2.5 billion.
Separately, the European Commission is investigating suspected oil price manipulation. Sen. Ron Wyden, D-Ore., who chairs the Senate Committee on Energy and Natural Resources, last month called on Department of Justice officials to join that probe.