Asian banks remain to be seen more scandals will surface

HSBC, Standard Chartered and DBS were among 20 banks at which 133 traders tried to manipulate the Singapore interbank offered rate (Sibor). Photo: Bloomberg

HSBC, Standard Chartered, JP Morgan Chase, Barclays and DBS were among 20 banks at which 133 traders tried to manipulate the Singapore interbank offered rate (Sibor), swap offered rates and currency benchmarks in the city state, [the Monetary Authority of Singapore] said.

BANKING scandals are surfacing in Asia, this time in the form of a US$250mil (RM799mil) fine on Mitsubishi UFJ Financial Group Inc on claims that it had transferred money to countries facing US sanctions.

According to the South China Morning Post, The Bank of Tokyo-Mitsubishi UFJ Ltd, the main lending unit of Japan's biggest bank by market value, moved an estimated US$100bil through the state for government and privately owned entities on the Specially Designated Nationals list.

This list was issued by the US Treasury Department's Office of Foreign Assets Control between 2002 and 2007, the New York State Department of Financial Services and New York Governor Andrew Cuomo said in a statement recently.

Just about two weeks earlier, the Monetary Authority of Singapore (MAS) had cracked down on the rigging of the Singapore Interbank Offered Rate or Sibor.

HSBC, Standard Chartered, JP Morgan Chase, Barclays and DBS were among 20 banks at which 133 traders had tried to manipulate the Sibor, swap offered rates and currency benchmarks in the city-state, MAS said in a statement recently.

Greedy

These incidents within Asian banks are significant, as the European and US banks have been bearing the brunt of criticism.

The major UK banks have been fined for the Libor (the London equivalent of Sibor) rigging and the mis-selling of products.

Due to their role in the churning of derivatives, these banks in the West have been described as greedy, careless and manipulative.

The recent scandals seem to involve only a few Asian banks, but it remains to be seen how many more names will surface and what sort of rules have been flouted.

In view of their important role in the economic growth of Asia, they will be closely watched in terms of risk exposure and ethical banking practices.

So, Asian banks, some of which have become very profitable, beware on all fronts.

In Europe, overnight talks aimed at ensuring shareholders and bond holders bear the brunt of bank failures collapsed after almost 20 hours of discussion, reports The Telegraph.

After investors, the proposals would impose losses on savers with more than 100,000 euros in their account, but France and non-eurozone countries want the ability to tailor the rules, the report says.

Discussing possible bank failures may not be the most urgent agenda, although extreme stress testing and estimation of potential bank losses should be conducted.

This is tied to the capital position of the bank.

However, there should be a constructive approach to boosting capital buffer and ensuring that the bank does not fail rather than what to do if it fails.

It is like pointing a gun at a man's head even before the crime is committed.

Bond bubble

There is said to be a “bond crisis” out there, where the bond bubble is about to burst, with investors looking for other asset classes to invest in.

With the impending halt to the US quantitive easing programme of additional liquidity, this search for other asset classes has become more urgent.

Nevertheless, 'We see improving US gross domestic product as a positive support to risk' assets such as shares, but would expect liquidity reductions to remove some of the froth' from current valuations, including in corporate bonds.

“Where we have the biggest concern is some of the riskier banks.

'Even five years on from the financial crisis, we cannot with any confidence say we are happy with the quality of their balance sheets; this is where risks of capital losses are highest,'' says Chris Bowie, manager of Ignis fund management.

Such is the reality of investing. It involves constant assessment of risk, changes in the markets and valuations.
Micromanagement is usually discouraged but may be useful in this case.

 By Yap Leng Kuen
Columnist Yap Leng Kuen cautions on the headwinds.
Related post:
For the sake of money people will risk anything

For the sake of money people will risk anything

Singapore's investigation into banks was triggered by the Libor-rigging scandal last year. 

HOT on the heels of the London interbank offered rate (Libor) rigging scandal comes the Singapore interbank offered rate (Sibor), the Singapore equivalent of the Libor rigging.

HSBC, Standard Chartered, JP Morgan Chase, Barclays and DBS are among 20 banks in which 133 traders tried to manipulate the Sibor, swap offered rates and currency benchmarks in the city-state, the Monetary Authority of Singapore (MAS) said in a statement recently.

For the sake of money, people will risk anything. In this case, Singapore is well known as a tough regulator, but they still dare to mess around with the Sibor. They are definitely asking for trouble.

According to South China Morning Post, MAS has censured banks for trying to rig benchmark interest rates and ordered them to set aside about S$12bil (RM30.13bil) at zero interest, pending measures to improve internal controls.

It is surprising that these traders have been caught with their pants down.

Regulators have cracked down on market players following the Libor rigging fiasco, which involved Barclays, UBS and the Royal Bank of Scotland paying fines of up to US$2.5bil (RM7.89bil).

This is why even when news emerged on punitive measures for the Libor rigging, very few people believed in its effectiveness.

MAS said it would make rigging key rates a criminal offence and bring supervision under its oversight.

To put this into process may take some time, while these market players exploit any loophole or weaknesses.

The fact that Asian banks are also involved in this Sibor rigging makes it even more unpalatable.

So far, Asian banks have remained strong amidst the financial crisis. Their reputation has remained largely untarnished, although most have been quite silent on their risk management.

Many of their Western counterparts have had to shed jobs massively and close down or downsize businesses, with some even having to accept taxpayers' money to survive.

At the same time, banks in the West became embroiled in the blame game, came under heavy fire from regulators and some even had to undergo a serious revamp of their business model.

Among the positive things happening among Asian banks is the recruitment of talent at a time of major job cuts in the Western banking sector.

But even that little positive aspect is going to be drowned by accusations of the Sibor rigging.

Manipulation of interest rates is a serious offence. Resulting from such collusion, some disruption may be seen in market movements, which may give rise to uncertainties.

Plain Speaking - By Yap Leng Kuen

Columnist Yap Leng Kuen reckons it is not always true that once bitten, twice shy.

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