Hong Kong moves interbank rate admin rights to industry group

HONG KONG Wed Feb 6, 2013 6:29am EST

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HONG KONG Feb 6 (Reuters) - The Hong Kong Monetary Authority will move administration of the interbank lending process to the Treasury Markets Association from the banks' lobby group, it said on Wednesday, as authorities worldwide scrutinise the troubled procedure.

Hong Kong's de facto central bank also said it was phasing out Hibor rates with little demand such as the four-, six-, eight- and nine-month rates, it said in a statement.

"The enhancements to the Hibor fixing process introduced by the HKMA today would help improve significantly the transparency and robustness of the Hibor fixing mechanism," a HKMA spokesman said in the statement.

The Treasury Markets Association is an industry group headed by the chief executive of the HKMA, and includes top executives from banks and the head of Hong Kong's Securities and Futures Commission.

The HKMA will also set up a code of conduct, it said, and institute a surveillance and governance structure.

HKMA is investigating possible misconduct by UBS over its submission of interbank rates, as part of a wider probe by central banks worldwide into the rate-setting process.

UBS has already agreed to pay $1.5 billion for its role in the Libor scandal. Royal Bank of Scotland will be hit with fines of almost 400 million pounds ($627 million) on Wednesday in connection with the scandal, according to sources familiar with the situation.

Besides Hong Kong, the Monetary Authority of Singapore is also investigating the possibility of manipulation of the Singapore benchmark rate (Sibor).

Both Hibor and Sibor are similar to Libor, their better-known London equivalent, and represent an average of the rates submitted by banks at which they are prepared to lend to each other.

In the two Asian cities, the rates are primarily used as a reference for pricing mortgages and other financial products as their cash-rich banks rarely need to depend on short-term interbank lending to raise funds.

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