Government reviewing SIBOR setting process

SINGAPORE: The government is reviewing the Singapore Interbank Offered Rate (SIBOR) setting process, and how the SIBOR can be ’more fundamentally strengthened’.

Senior Minister of State for Education and Information, Communications and the Arts Lawrence Wong said this in Parliament on Monday, on behalf of Deputy Prime Minister Tharman Shanmugaratnam, who is also Chairman of the Monetary Authority of Singapore (MAS).

Mr Wong was replying to a question by Member of Parliament for Tanjong Pagar GRC, Dr Lily Neo.

He said there is a case for stronger governance or supervision over the setting of these rates.

This comes as the London Interbank Offered Rate (LIBOR) has been hit by a scandal in which traders from many banks rigged rates to maximise profits.

More recently, US Federal Reserve chairman Ben Bernanke called LIBOR ’structurally flawed’.

Mr Wong said the SIBOR shares a similar history as LIBOR — as the rates are price discovery mechanisms for lending and borrowing between banks.

He said these rates were set by the association of banks.

Over time, the interbank rates also came to be used for other purposes — for loans to corporates and individuals.

Singapore has also strengthened its processes — the latest being in 2009.

Dr Neo said: "Is the Minister concerned that the rates may be skewed, in view of the fact that less than 12 banks are contributing to submission to Association of Banks in Singapore presently, instead of the 17 banks in the past?"

Mr Wong said: "MAS is indeed looking at it more fundamentally to see how SIBOR can be strengthened. We are also studying what other jurisdictions are doing, because this is not just a matter for Singapore alone — many other jurisdictions are also having similar reviews, similar studies. And it’s also a discussion happening in international forums. So we’re keeping track of these.

"Whether the rates may be skewed, whether we should use actual rates rather than nominated rates, these are all part of the considerations in which I think we want to look at fundamentally — how SIBOR can be strengthened, how there can be better transparency in the rate—setting process, how there can be use of actual data."

— CNA/de