Singapore banks slapped with stricter financial benchmark regulations

New criminal and civil sanctions introduced.

In a release, the Monetary Authority of Singapore (MAS) said that the proposed new regulatory framework for financial benchmarks has two key thrusts.

First, MAS will introduce specific criminal and civil sanctions under the Securities and Futures Act (SFA) for manipulation of any financial benchmark. This will cover all financial benchmarks including SIBOR, SOR, and FX Benchmarks.

Second, MAS intends to subject the setting of key financial benchmarks to regulatory oversight. MAS will have the powers under the SFA to designate key benchmarks based on considerations such as the systemic importance of a benchmark and an assessment of its susceptibility to manipulation.

MAS proposes to designate as key benchmarks the SIBOR, SOR and FX Benchmarks currently administered by the Association of Banks in Singapore (ABS).

The administrator and submitters of key benchmarks will be required to be licensed by MAS, and will be subject to regulatory requirements.

Requirements for administrators of key benchmarks will include: i. establishing effective arrangements for regular monitoring and urveillance of benchmark submissions; ii. putting in place robust governance arrangements to identify and mitigate actual and potential conflicts of interest; and iii. establishing a committee that will be responsible for overseeing the benchmark administration process and code of conduct for submitters.

Requirements for submitters of key benchmarks will include: i. compliance with the code of conduct for submitters developed by the respective administrators; and ii. appointment of an external auditor to conduct an annual independent review of the submitter’s benchmark submission activities and submission of this auditor’s report to MAS.

The industry will be announcing new measures to improve the financial benchmark setting process for existing benchmarks. MAS welcomes these
measures.

Teo Swee Lian, Deputy Managing Director, MAS, said, "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. The proposed new regulatory framework will minimise the risk of attempts to inappropriately influence these benchmarks. The industry must also play its part in enhancing the robustness of the financial benchmarks, and in cultivating high standards of professional integrity and ethics."