When traders got caught fiddling Libor, their employers blamed a few bad apples. Singapore has found 133 people at 20 banks trying to rig three rates. That sounds more like a rotten barrel.
The four banks previously rapped for Libor were hounded on a case-by-case basis. For those lenders - Barclays, Citigroup, Royal Bank of Scotland and UBS - the spotlight accentuated the humiliation. Singapore's central bank has spared each of the banks that fiddled rates on its turf that embarrassment. Yet the collective blame makes the industry look worse.
The banks avoid the loss of business to competitors, since nearly everyone seems to have been involved. They also avoid fines, presumably because attempted rate manipulation was not a criminal offence at the time. Instead, 19 of the 20 censured banks will have to pony up additional cash reserves for one year, up to a total of $10 billion.
The reserves are effectively an interest-free loan to the Singaporean government for a year, and a deferred prosecution agreement: the additional reserves will not be returned until the central bank has approved changes to rate-setting processes.
The Monetary Authority of Singapore may have found no "conclusive" evidence that any trader actually succeeded in gaming the system. But the attempts were systematic, over four years, from 2007 to 2011, and involved three different benchmark rates: Sibor, the interbank rate that is Singapore's equivalent to Libor; a swap offer rate for commercial and mortgage lending; and a forward currency benchmark rate.
The attempted fix in the foreign-exchange market chimes with an investigation under way by the UK regulator. In one jurisdiction or another, the process of setting benchmark prices for gold, credit-default swaps, and oil and gas contracts are under scrutiny. It appears benchmarks entice abuse like flowers attract bees.
The International Organization of Securities, which is leading global efforts to reform rate-setting processes, says benchmarks should be based on actual transactions. There are also too many: Singapore alone had 11. The city island-state's cleanup thus offers a glimmer of light - six rates are being discontinued and four of the remaining five will now be based on actual trade data, not on traders' possibly twisted imaginings.
