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Jakarta Post

Bank Indonesia lauds Singapore punishment on forex collusion

The Indonesian central bank, Bank Indonesia (BI), hailed its Singaporean counterpart for punishing traders found guilty of manipulating rupiah quotes

Satria Sambijantoro (The Jakarta Post)
Jakarta
Tue, July 2, 2013

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Bank Indonesia lauds Singapore punishment on forex collusion

T

he Indonesian central bank, Bank Indonesia (BI), hailed its Singaporean counterpart for punishing traders found guilty of manipulating rupiah quotes.

The Monetary Authority of Singapore (MAS), has ordered banks proven guilty of collusion to fire the employees involved, a form of punishment, according to one senior BI official that was considered '€œquite ruthless'€.

'€œThose people [the punished employees] were treated as if they were criminals [...] they will find it difficult to get another job in Singapore,'€ BI executive director for reserves and exchange management, Treesna Wilda Suparyono, said on Monday, adding that the punishment proved MAS'€™ awareness of BI'€™s concerns.

Internal reviews by banks in Singapore have found evidence that traders from several banks colluded to deliberately weaken the rupiah by manipulating their quotes for non-deliverable forwards (NDF).

The NDF is the rupiah quote determining the currency'€™s future value within a one-month timeframe and is used by investors to hedge the risks associated with currencies that are illiquid and highly volatile, such as the rupiah.

The gap between rupiah rates in Jakarta and NDF in Singapore widened recently, with NDF touching 10,533 per US dollar on June 20, its weakest level in three years.

Suspicions arose that rupiah rates in Singapore had been fabricated because those of the Jakarta Interbank Spot Dollar Rate (JISDOR) had never been weaker than 9,960.

Weak forwards quotes would create bearish perceptions of the rupiah, as local currency traders still use Singapore'€™s NDF as a benchmark when settling foreign currency transactions.

The MAS has accordingly censured at least 20 banks for rigging key borrowing and currency rates, Reuters reported.

Banks found guilty in the case are UBS, ING, RBS, BNP Paribas, Bank of America, OCBC, Barclays, Credit Suisse, DBS, Deutsche Bank and Standard Chartered.

Besides having to discharge employees, the guilty banks also must set aside additional reserves to MAS. Banks such as UBS, ING and RBS were obliged to post between S$1 billion (US$800 million) and S$1.2 billion extra with the Singaporean central bank.

The rupiah, unfortunately, is not a lone victim in this case.

Earlier this year, 15 banks in Singapore were reportedly found to be involved in determining the NDF rate for the Malaysian ringgit and 12 for the Vietnamese dong.

That report prompted BI to ask other central banks in the region to combat foreign exchange (forex) collusion together.

Many central banks in emerging economies, including BI, see the NDF as their enemy, as it is vulnerable to speculation that could prompt unwanted volatility for their currencies.

'€œBI does not like the NDF and it is irked when there is a local bank involved in it,'€ said a Jakarta-based economist, who spoke anonymously due to the sensitivity of the issue.

BI'€™s discontent over the issue has caused local banks to keep it secret when they used NDF instead of local rates when settling their transactions with offshore banks, according to the economist.

Earlier this year, BI reprimanded local banks, saying they were not allowed to dabble in the NDF market. In May, the central bank introduced the so-called JISDOR as the new reference rate for the rupiah, a move that analysts believed was an effort to lure local banks to use domestic rupiah quotes instead of offshore ones.

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