Daily Dispatches - Over 100 traders lose jobs in Singapore interest rate fiasco
More than one hundred trading jobs could be up for grabs in Singapore after the country's monetary authority, MAS, came down hard on 20 banks on Friday for trying to rig interest rates. MAS says that 133 employees across both local and foreign institutions had been identified, and three quarters of them have been sacked or have resigned, while the rest have been disciplined with demotions and lost bonuses.
On top of this, 19 of the 20 banks will now each have to cough up as much as SGD$1.2 billion as 'extra reserves', held by MAS for a year at zero interest while the banks beef up internal controls. Only Commerzbank has escaped this requirement. Banks named in the latest interest rate rigging debacle include RBS, HSBC, ING, UBS, ANZ, Macquarie, Standard Chartered, Barclays and three Singaporean finance houses, DBS, OCBC Bank and United Overseas Bank.
The announcement of the bid to rig the interest rate market comes after a year-long review by MAS of activities that took place between 2007 and 2011. Although the new reserve requirement is not a fine, which means the rigging does not constitute criminal activity, MAS is looking to change the laws around trading to make manipulation a criminal and civil offence. The authority is planning to introduce specific criminal and civil sanctions under the Securities and Futures Act for attempts to manipulate any financial benchmark, which will cover all financial benchmarks including SIBOR, SOR and foreign exchange benchmarks.
The big announcement this week will be the outcome of the US Federal Reserve's policy meeting. Investors around the world are hoping for some clarity about whether the Fed will start tapering its quantitative easing strategy in the third and fourth quarters of this year. After last week's market upheavals in Asia, investors played cautious in early Monday trading, hunkering down for the Fed announcement. The Wall Street Journal's Asia edition said that "stocks and currencies in Asia (had) seesawed in recent weeks amid growing expectations that the Fed could start to roll back its bond-buying program, with the effect particularly strong in emerging markets and commodity-linked currencies."
Unregulated lenders' long shadow over China's economy
Worries about China's shadow banking industry have had a knock-on effect on the country's interbank market, with rates soaring last week to 9.6% from 3% only a month ago. The Financial Times says the country's leadership is tolerating this liquidity squeeze as a partly successful effort to slow sales of wealth management products in the shadow banks, which number in the tens of thousands. These lenders are providing increasing amounts of credit to businesses and governments outside the mainstream banking market. Only last week, rating agency Fitch said this unregulated market offered little visibility about where the money is going, who is lending, and the quality of assets, "meaning traditional warning signs will not function properly".
Dealogic reports that the equity and debt capital markets experienced a lull in activity last week. Only USD$871 million was raised in Asian equity capital markets in 18 deals, the lowest week of activity since the first week of January when only USD$ 32 million was raised in five deals. In the year to date, Goldman Sachs leads the league ranking tables with USD$9 billion in deals, followed by UBS and Morgan Stanley.
A court in China has sent a man to jail for a year for defrauding banks and other companies of more than USD$1.6 billion by forging financial documents. The former president of an investment management company in Shanghai pilfered the jaw-dropping sum in only two years by, among other subterfuges, pretending to be a bank employee. Around 80% of the money was recovered.
When transparency is a bad thing
Lululemon, which sells yoga pants, has lost two senior executives in recent weeks, including CEO Christine Day. Speculation is growing that Day was forced out of her role after Lululemon was forced to pull some of its yoga range from retailers for being too transparent. The company is now also dealing with the fall-out from what appears to a fake job ad for the position vacated by Day. CNN reports that 160 people have responded to a job posting calling for applicants to be fluent in Sanskrit, and says they must be able to hold a headstand for 10 minutes, and have Bill Clinton and Oprah Winfrey on speed dial.