Singapore - Singapore's central bank censured a record 20 banks on Friday after it found more than 100 traders in the city state tried to rig key borrowing and currency rates.
The probe by the Monetary Authority of Singapore (MAS) marks the latest development in a global crackdown on rate-rigging and adds more banks, including ING and Bank of America, to the list of lenders involved.
The watchdog said 133 traders had tried to inappropriately influence the rates. It did not fine the banks, but ordered them to set aside additional reserves for a year.
The city state's banking and market associations also unveiled reforms of how banks will set the benchmarks, including basing some of them on actual trades rather than estimates submitted by banks. Europe and the United States are also pushing for benchmark rates to be based on actual trades.
Financial market reference rates are under intense scrutiny around the world following the discovery that some had been rigged, most notably the Libor - London Interbank Offered Rate - benchmark for interest rates.
Barclays was the first bank to be fined for Libor manipulation, and US and UK authorities have slapped fines of hundreds of millions of dollars on Royal Bank of Scotland and UBS and are investigating more banks.
The regulatory focus has now expanded to the foreign exchange market. Britain's financial watchdog is looking into a report that traders manipulated benchmark foreign exchange rates.
The Singapore watchdog ordered UBS, RBS and ING to set aside the most in additional reserves, with each having to post between S$1bn ($800m) and S$1.2bn extra with the central bank. The money will be returned if the banks take the required remedial action.
Review expanded to forex
The regulator said of the 133 traders found to have acted inappropriately, three quarters had either been fired or resigned. The remainder would be subject to disciplinary action, including forfeiting their bonuses.
UBS said these were the actions of a few in the past. A UBS spokesman said it had significantly strengthened its internal procedures and controls.
ING said it had taken disciplinary action against the small number of individuals involved. RBS said it would comply with any required remedial measures.
Other banks censured included BNP Paribas, Bank of America, Oversea-Chinese Banking Corporation, Barclays , Credit Suisse, DBS, Deutsche Bank and Standard Chartered.
"The punishment is not light. It is a good reminder to banks to keep their governance in order. The opportunity cost of not lending the money can be quite hefty," said Roger Tan, CEO of SIAS Research, the equity research arm of the Securities Investors Association (Singapore).
The Singapore regulator first ordered banks in the city-state to review benchmark borrowing rates nearly a year ago. That review was extended in September last year to foreign exchange benchmark rates used to price currency derivatives, particularly instruments known as non-deliverable forwards.
Reuters reported in January how the banks' investigations had found evidence that traders were manipulating rates in the offshore foreign exchange market.
Singapore's two main lending benchmarks, the Singapore Interbank Offered Rate (Sibor) and the Swap Offer Rate (SOR) are used to price mortgages and other types of loans.
The Singapore Foreign Exchange Market Committee and the Association of Banks in Singapore announced that the US-dollar linked version of Sibor would be scrapped, with banks relying on US-dollar Libor instead.
It also said that, while Singapore dollar Sibor would continue to be based on banks' estimates of borrowing costs, other benchmark rates, including the SOR, the Indonesian rupiah and the Thai Baht would now be based on traded prices.
Benchmark rates for the Malaysian ringgit, Vietnamense dong, and swap offer rates for the Indonesian rupiah and Thai baht will be scrapped.
Thomson Reuters, the parent company of Reuters News, calculates and distributes the benchmark rates for the Association of Banks in Singapore.