Exclusive: Bank probes find manipulation in Singapore's offshore FX market - source

Sun Jan 27, 2013 7:41pm EST
 

By Rachel Armstrong

SINGAPORE (Reuters) - Internal reviews by banks in Singapore have found evidence that traders colluded to manipulate rates in the offshore foreign exchange market, according to a source with knowledge of the inquiries.

The discovery widens a global lending rate scandal into new markets, as fallout from the Libor case puts banks under added scrutiny and spurs both regulators and institutions to reconsider how certain key interest and currency rates are set.

The probes found evidence showing that traders from several banks communicated with each other over electronic messaging about what rates they were going to submit for the local banking association's fixings for non-deliverable foreign exchange forwards (NDFs), aiming to benefit their trading books.

"Traders were talking to traders, saying: 'I need you to help me today, I need to fix low,'" said the bank source, who asked not to be identified due to the confidential nature of the reviews.

NDFs are derivatives that let companies and investors hedge or speculate on emerging market currencies when exchange controls make it difficult for foreigners to participate directly in the spot market.

The contracts are settled in dollars, so there is no exchange of the underlying currency, but they can affect spot exchange rates.

The Monetary Authority of Singapore ordered banks that help set local interbank lending rates and NDF rates to review the fixing process last year as U.S. and British regulators cracked down on manipulation of the London interbank offered rate (Libor), a benchmark used to set interest rates for around $600 trillion worth of securities.

The investigations into Libor led to fines of $1.5 billion for UBS AG and $451 million for Barclays Plc for rate rigging. Regulatory probes stemming from the Libor cases in the United States and Britain have also revealed evidence of attempted manipulation of benchmark interbank lending rates in Tokyo, Hong Kong and Australia.   Continued...

 
A man leaves the premises of the Monetary Authority of Singapore in the central business district of Singapore January 18, 2013. REUTERS/Edgar Su