Jurisdiction - Singapore
Reports and Analysis
Asia Pacific – LIBOR, The Asia Story.

14 November, 2012

 

Legal News & Analysis – Asia Pacific – Singapore – Insurance & Reinsurance

 

While “LIBOR” may be a well-known acronym in the West, in Asia, it is known as HIBOR in Hong Kong, SIBOR in Singapore and TIBOR in Japan. In some respects the Asian regulatory authorities have been more proactive than those outside Asia and this article seeks to summarise some of the main developments. 
 
What is the impact in Asia?
 
Singapore was one of the first Asian countries under the spotlight when on 23 August 2012 The Business Times splashed:
 
“Ex-RBS man gives LIBOR setting a S’pore twist” . 
 
This was reference to a lawsuit, first filed in late 2011, by a former global banking and marketing division head of RBS, Tan Chin Min, which highlighted RBS’s practices in setting LIBOR.
 
Tan Chi Min has alleged in his suit against the bank before the Singapore High Court, that he was wrongfully dismissed for alleged gross misconduct related to the setting of LIBOR for the Japanese yen, in order to deflect attention from the bank’s own responsibility over the LIBOR affair. The Bank in turn has responded that Tan Chi Min tried to influence RBS’s rate setters to submit LIBOR rates at certain levels in order to boost the overall profits. To substantiate his allegations, Tan Chi Min’s lawyers disclosed documents to illustrate how the risk of abuse was embedded in the process for setting LIBOR . However RBS recently argued that making the documents publicly accessible may have “extensive potential prejudice” on the parallel, confidential regulatory investigations. Consequently, court documents have now been sealed. The case continues.
 
RBS continues to remain in the spotlight following the actions of another Singapore-based foreign-exchange trader Ken Choy. Mr Choy has been placed on “compliance leave” and, although RBS has declined to comment on the specifics of his case, it is thought that it is connected to the bank’s role in setting daily reference rates for currencies. 
 
On 30 October 2012 UBS hit the headlines as it revealed it is being investigated in Singapore for possible manipulation of LIBOR and other benchmark rates. Authorities in the UK, US and Switzerland are currently in the preliminary stage of their reviews but one thing is clear: investigations in Singapore have taken on a more meaningful stance as regulators pursue all lines of enquiry.
 
South Korea’s financial regulator has also commenced investigations into allegations of a similar interest rate rigging action by a number of Korean banks, namely Kookmin, Shinhan, Woori and Hana. This investigation focuses on the possible collusion between financial institutions over setting Certificate of Deposits (CD) which is used as a benchmark to set lending rates. Banks and brokerage firms gain from high CD rates as housing mortgages are linked to them. Similar to the LIBOR rigging consequence, CD rigging can help to “flatter a company’s financial health”. There will be significant fines if the financial regulator’s investigations find evidence of collusion.
 
In Japan, the Financial Times reported earlier this year that Citigroup wrote off US$50 million when two employees from its Japan units were found to have influenced TIBOR.
 
In another matter, a non-Japanese employee of the European based headquarters of Mitsubishi UFJ Financial Group, was being investigated for manipulating the yen-based LIBOR rate. He is alleged to have submitted a lower yen LIBOR rate in February 2009 after he was encouraged to do so by an unnamed individual from another financial institution. The Japanese FSA said that this investigation touched the yen LIBOR for the first time. It is believed that the size of this alleged or attempted manipulation is small.
 
Looking ahead
 
Asian regulators are well known for refusing to tolerate even the slightest diversion from the rules and have always come down hard on the companies they regulate, no matter whether they are domestic or foreign owned. We should expect to see the Asian regulators setting the tone for how these issues should be dealt with and no doubt they will broaden the scope of their investigations beyond LIBOR to encompass other benchmarks. This was most recently highlighted by UBS’s 
decision to put at least two of their foreign exchange traders on leave as part of a probe into the manipulation of NonDeliverable Forwards (“NDFs”). Moreover, the
 
Monetary 
 
Authority of Singapore (“MAS”) announced in September that it will extend its probe into rate rigging to include NDFs.

 

 

For further information, please contact:

 

Nilam Sharma, Partner, Ince & Co
nilam.sharma@incelaw.com
 
Aruno Rajaratnam, Partner, Ince & Co
aruno.rajaratnam@incelaw.com
 
Nilam Sharma, Partner, Ince & Co
nilam.sharma@incelaw.com
 

 

 

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