Jurisdiction - Singapore
Reports and Analysis
Singapore – Proposed Regulatory Framework For Financial Benchmarks.

19 June, 2013


Legal News & Analysis – Asia Pacific – Singapore – Regulatory & Compliance



The Monetary Authority of Singapore (“MAS”) has on 14 June 2013 released a consultation paper for a new regulatory framework for the setting of financial benchmark interest and exchange rates. 


This follows a year-long review by MAS into the practice of various financial institutions in respect of their participation in the Singapore Interbank Offered Rate (“SIBOR”), the Swap Offered Rate (“SOR”), both of which are commonly used as reference rates for various loans, and also the foreign exchange spot rates commonly used to settle non-deliverable forward foreign exchange contracts (“NDF FX Rates”) over the period from 2007 to 2011. 

As a result of the review, 20 banks were found to have deficiencies in their compliance and control regimes with respect to their involvement in submissions to these benchmark rates. MAS has censured these banks and directed them to remediate the identified deficiencies. In addition, the banks have been required to set aside additional statutory reserves (of varying amounts) with MAS at zero interest for a period of one year. MAS has indicated that the duration for which the statutory reserves are to be maintained may be varied depending on how MAS assesses their remediation efforts. MAS has said that the regulatory actions have been calibrated according to the severity and the extent of the misconduct by the staff of the banks.

The closing date for the consultation is 15 July 2013.


MAS has proposed that the following key elements of the new framework be introduced via amendments to the Securities and Futures Act(“SFA”):

(a) introducing criminal and civil sanctions for the manipulation of any financial benchmark;
(b) providing for legal powers to designate key financial benchmarks and subject their administrators (“Administrators”) and submitters (“Submitters”) to regulation;
(c) issuing best practice guidance for other benchmarks consistent with principles set by the International Organisation of Securities Commissions (“IOSCO”); and
(d) providing for legal powers to compel entities to participate as Submitters to establish the relevant designated financial benchmarks.

Scope of regulation – definition of “financial benchmark”

MAS has proposed that “financial benchmark” be defined as:

“(1) Any price, estimate, rate, index or value that is –


(a) Calculated periodically using a formula or other methodology;and
(b) Used for reference to determine 

(i) the interest payable or other sums due on deposits or loan agreements;
(ii) the price, value or performance of any capital markets product as defined under the SFA or investment product as defined under the Financial Advisers Act; or
(iii) the price, value or performance of any product offered by any entities regulated by MAS;

(2) Or such other price, estimate, index or value as MAS may prescribe.”

MAS has indicated that this definition is aimed at capturing what constitutes a financial benchmark in the context of the financial industry as well as being broadly consistent with the way “benchmark” is defined in the IOSCO principles.

Criminal and civil sanctions for financial benchmark manipulation


While financial benchmark manipulation may amount to an offence under the existing patchwork of laws, MAS has felt that these may not be sufficiently broad to cover all possible scenarios where financial benchmarks are manipulated. The offences and penalties currently provided for under the existing patchwork of laws may also provide insufficiently effective deterrence.

It is proposed that Part XII of the SFA be expanded to include a new division specifically prohibiting the manipulation of any financial benchmark. Such prohibition will apply irrespective of whether the offender is in Singapore or overseas. This new division will be similar to existing provisions in the SFA prohibiting false trading and manipulation of securities, and will also allow for similar criminal or civil penalty sanctions to be imposed on the offender.

In instances where the offender carries out the misconduct within a corporate entity, MAS has proposed that the corporate entity be subject to criminal liability if the manipulation had been committed with the consent or connivance of the corporate entity, and with civil liability if the corporate entity had been negligent in failing to prevent or detect the offender’s misconduct. It is however presently unclear if the reference by MAS to civil liability is to liability to a civil penalty action taken by MAS or to civil liability to pay damages in an action brought by an injured party. 


Regulation of key financial benchmarks

Power to prescribe benchmarks for regulation


Singapore currently does not regulate financial benchmark setting activity. As financial benchmarks are developed in response to market needs, the industry norm (in Singapore as well as in other jurisdictions) has been for the financial industry to self-regulate the activities relating to the setting of financial benchmarks.

In light of recent reviews conducted in various jurisdictions, MAS is of the view that the regime under which financial benchmarks are set should be enhanced via a formal regulatory framework. Accordingly, the proposal is to formally regulate activities relating to the setting of such financial benchmarks which are designated by MAS as key benchmarks. It is proposed that the following considerations be taken into account in deciding which benchmarks should be considered to be key benchmarks:

(a) the systematic importance of a financial benchmark, i.e. whether significant financial and economic impact could result from a disruption to the credibility or reliability of the benchmark;
(b) the degree to which a financial benchmark is susceptible to manipulation, including the degree of discretion involved in the setting of such benchmark; and
(c) whether such a designation is necessary in the interest of the public. 


It is also proposed that Administrators and Submitters of designated key financial benchmarks be subject to regulation under a new part of the 

Designated benchmarks

Initially, MAS will designate the financial benchmarks that have been the subject of review (namely SIBOR, SOR and the NDF FX Rates) as key financial benchmarks. These benchmark rates are currently administered by the Association of Banks in Singapore.

Best practice guidance for other financial benchmarks

Benchmark setting activities in respect of benchmarks not designated as key financial benchmarks will not be directly or formally regulated. For these benchmarks, MAS will issue best practice papers to provide guidance to regulated financial institutions. 

Regulatory regime for administration of designated benchmarks

Licensing requirement

MAS proposes that the administration of a financial benchmark that is designated will itself be an activity subject to regulation. An entity would be 
“administering a designated benchmark” and be subject to licensing as an Administrator if it carries out any of the following:


(a) controlling the development or review of the definition of a designated benchmark or the methodology for the determination of a designated benchmark;
(b) administering the arrangements for determining a designated benchmark;
(c) collecting, analysing or processing information or expressions of opinion for the purpose of determining a designated benchmark;
(d) determining a designated benchmark through the application of a formula or other method of calculation to the information or expressions of opinion provided for that purpose; or
(e) monitoring and conducting surveillance of information or expressions of opinion provided for the determination of adesignated benchmark.

Where the above activities are shared amongst several entities, then all the entities involved will be subject to licensing.

Admission criteria

The following admission criteria have been proposed for Administrators:

(a) legal person – the Administrator is to be a corporation with a permanent physical office in Singapore;
(b) fit and proper – MAS has to be satisfied that the Administrator, its directors and senior management are fit and proper to carry out the activities of administering a designated benchmark, having regard to MAS’ “Guidelines on Fit and Proper Criteria” (FSG-G01);
(c) financial resources – the Administrator is to ensure that it has sufficient financial resources to cover at least six months of operating costs of administering its benchmark.

On-going requirements

The following on-going requirements have been proposed for Administrators. Where multiple entities are involved in administering a designated benchmark, MAS has noted that it may not be necessary or practicable to apply all of the following requirements to each of the entities involved. In such cases, MAS has indicated that it would consider exempting specific entities from certain requirements which are not applicable.


The proposed governance requirements will consist of the following:

(a) the Administrator is to establish procedures to ensure the confidentiality of benchmark information received from Submitters;
(b) the Administrator is to put in place arrangements for regular monitoring and surveillance of benchmark submissions to identify any market anomalies or suspected breaches of practice standards;
(c) the Administrator is to establish and maintain effective arrangements to identify and mitigate actual and potential conflicts of interest, and whistle-blowing procedures to allow any person to report suspected misconduct;
(d) the Administrator is to develop a Code of Conduct for Submitters which has to be approved by MAS and must cover:

(i) policies and procedures for presubmission validation of inputs;
(ii) clear guidance for a hierarchy of data inputs and the appropriate exercise of expert judgment;
(iii) policies and procedures for Submitters to submit all relevant data; and
(iv) effective governance arrangements to identify and mitigate actual and potential conflicts of interests, including setting out the criteria for individuals who can submit and the internal sign-offs required.

Oversight committee

The proposed requirements in respect of the oversight committee will consist of the following:

(a) the Administrator is to establish a committee responsible for the oversight of the benchmark design, integrity of the benchmark determination and governance framework, and the Code of Conduct for Submitters;
(b) persons who are independent of the management of the Administrator and Submitters must comprise at least onethird of the oversight committee;
(c) the oversight committee must also include balanced representation from relevant stakeholders such as representatives from the board of directors of the Administrator, Submitters, users of the benchmark, and financial market infrastructure providers;
(d) all members of the oversight committee must be approved by MAS;
(e) MAS is to be notified without delay where it suspects any person of misconduct that may involve manipulation of the designated benchmark it administers.


Fit and proper 

The Administrator is to ensure that individuals involved in the activity of administering a designated benchmark are fit and proper.



The Administrator is to publish quarterly aggregate statistics outlining the activity in the underlying market relevant to the designated benchmark.

Availability of benchmark 

The Administrator is to ensure uninterrupted publication of the benchmark rate, and that the most recent rates are publicly available within a reasonable time.


The Administrator is to put in place appropriate policies and procedures for effective oversight of outsourcing arrangements where third parties are engaged in accordance with the “Guidelines on Outsourcing” published by MAS. This includes written contractual agreements setting out clear standards of service expected of third parties.

External audit

The Administrator is to appoint an independent external auditor with the appropriate expertise and which is approved by its oversight committee, to
conduct a yearly review of the Administrator’s adherence to its stated policies and procedures, and the relevant laws and regulations. A report from the auditor must be submitted to MAS.

Record keeping

The Administrator is to keep written records of relevant underlying market data, submissions received from Submitters, and published benchmark rates for a period of no less than five years.

Transition protocols

The Administrator is to put in place clear policies and procedures to address transition issues arising from the termination of a benchmark or changes to the tenor of a benchmark arising from changes in underlying market conditions. This would include procedures for the maintenance of parallelbenchmarks to exist for a defined period of time, and policies defining the period of time in which a benchmark should continue to be produced after the announcement of its termination.

Regulatory regime for Submitters of designated benchmarks

MAS also proposes that the activity of contribution towards the setting of a financial benchmark that is designated will be similarly subject to regulation. 

Any entity that carries out the activity of “providing or transmitting information or expressions of opinion to an Administrator, or to another entity which transmits such information to the Administrator in connection with a designated benchmark” will be subject to regulation as a Submitter and either be required to obtain a licence from MAS under a new part of the SFA, or operate under a specific exemption.

MAS proposes that Submitters be subject to similar licensing criteria as apply to Administrators in respect of being a “legal person” and being “fit and proper”. Submitters will however, not be subject to the “financial resources” requirement. 

On-going requirements

In addition, it is proposed that Submitters will be subject to the following on-going requirements.


Submitters are to comply with the relevant Code of Conduct for Submitters developed by the Administrator and to notify MAS without delay where it suspects any person of misconduct that may involve manipulation of a designated benchmark.

Fit and proper

Submitters are to ensure that individuals responsible for the activity of providing submissions to benchmarks are fit and proper.

Record keeping

Submitters are to keep written records of benchmark submissions and all information used to derive each benchmark submission for a period of no less than five years. Such written records must include the names and roles of individuals responsible for the submission and the supervision of the submission process. In addition, Submitters are to keep written records of individual traders, trading desks, and the Submitter’s aggregate exposure to instruments which reference designated benchmarks, if any.

External audit

Submitters are to appoint an independent external auditor with the appropriate expertise to conduct a yearly review of the Submitter’s adherence to its stated policies and procedures pertaining to benchmark submissions and the relevant laws and regulations. A report from the auditor must be submitted to MAS.


Powers to compel entities to be Submitters to designated benchmarks

Unlike other activities currently regulated under the SFA, participation in the setting of financial benchmarks is not an activity that directly generates revenues. Hence, MAS proposes to enhance its powers to enable it to compel, where necessary, financial institutions to be Submitters for designated benchmarks. In the exercise of such powers, MAS proposes to set out criteria to identify the appropriate entities, taking into account the specific methodology for the designated benchmark as set out by the Administrator.

MAS’ rationale is that the continued publication and reliability of designated benchmarks is important to proper market functioning and that apool of Submitters which is too small may impact the accuracy of the benchmark and increase the risk of benchmark manipulation. This may happen given that benchmarks are publicly available whilst it is proposed that Submitters be subject to regulation. A market participant may thus be incentivised to free-ride on the publicly available benchmark without contributing to its construction.



In the light of the global scandal concerning financial benchmarks, which continues to unfold, the measures proposed by MAS should be welcome to help reassure financial markets of the credibility and reliability of financial benchmarks. Plainly the existing system is flawed in permitting traders working in the participating banks to engage in the behaviour that has now come to light. 

Significantly, one impact of the new measures, should they be implemented in the form proposed in the consultation paper, is that the Association of Banks in Singapore, which has traditionally been an association body rather than an operating entity, would come under MAS regulation in its capacity as administrator for SIBOR, SOR and the NDF FX Rates.


Please click on the links below to refer to the relevant documents:

1. Consultation Paper on the Proposed Regulatory Framework for Financial Benchmarks
2. Principles for Financial Benchmarks published by IOSCO



For further information, please contact:


Eric Chan, Director, Drew & Napier 

[email protected]


Regulatory & Compliance International Law Firms in Singapore



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