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27-07-12, 22:25
http://www.straitstimes.com/Money/Story/STIStory_824199.html
Sibor panel for setting interest rate shrinks
Published on Jul 20, 2012
THE number of banks here supplying data to help set an important benchmark interest rate has dwindled to 12 from 17 in February.
The Association of Banks in Singapore (ABS), which sets the Singapore interbank offered rate (Sibor) - the rate at which banks lend to one another - said the official number was 15 as of July 5.
Two banks had dropped out, at least on paper, the ABS said.
However, it turns out that the actual number of banks telling ABS the rate at which they think they can borrow from other banks is now only 12.
For instance, ING Bank was one of the 15 banks officially on the list, but an ING spokesman clarified that it has not been contributing to the Sibor since 2008.
The Straits Times understands the discrepancy may be due to the fact that ING had not sent in a formal withdrawal notice to ABS.
That means ING spent four years officially on the list when it was not contributing data.
Yesterday, the industry body clarified that it 'receives daily contribution of rates to Sibor from 12 banks', but did not disclose which banks have dropped out.
It said in an e-mail statement: 'According to the ABS Market Fixings Governance and Procedures, the minimum number of banks to quote a rate is 12. The formula to drop off the top and bottom quartiles remains. Now with 12 banks, we take the mean rate of six banks. Earlier in February, we had more banks quoting the rate and the mean was calculated with eight banks.'
Every day, contributing banks submit rates at which they think they can borrow funds from other banks. Thomson Reuters eliminates the top and bottom 25 per cent before averaging the rest to derive the day's Sibor.
On Monday, ABS said submissions for Sibor are voluntary, and that contributing banks need not give a reason for exiting the panel.
One bank which has stopped contributing is the Royal Bank of Scotland (RBS). It notified ABS in late April that it would no longer contribute and stopped sending in its daily rates on May 31.
Industry sources say the bank's decision was made to prioritise its resources on areas where it believes it has the greatest potential for sustainable growth.
With the dwindling number of contributors, some industry players are worried that the Sibor will become more volatile as it becomes more susceptible to price discrepancies between the banks.
However, Bank of America Merrill Lynch economist Chua Hak Bin said that so long as the banks with large Singdollar deposit bases remain contributors to Sibor, it should not matter that much.
The three local banks, as well as Standard Chartered Bank and Citibank, contribute daily.
'Twelve is still a sufficiently large number and by the process of cutting away the tails it reduces the risk of volatile number. It would be ideal if there was a more transparent process. The Sibor is a very important benchmark for pricing, and especially mortgage markets,' said Dr Chua.
MAGDALEN NG
Sibor panel for setting interest rate shrinks
Published on Jul 20, 2012
THE number of banks here supplying data to help set an important benchmark interest rate has dwindled to 12 from 17 in February.
The Association of Banks in Singapore (ABS), which sets the Singapore interbank offered rate (Sibor) - the rate at which banks lend to one another - said the official number was 15 as of July 5.
Two banks had dropped out, at least on paper, the ABS said.
However, it turns out that the actual number of banks telling ABS the rate at which they think they can borrow from other banks is now only 12.
For instance, ING Bank was one of the 15 banks officially on the list, but an ING spokesman clarified that it has not been contributing to the Sibor since 2008.
The Straits Times understands the discrepancy may be due to the fact that ING had not sent in a formal withdrawal notice to ABS.
That means ING spent four years officially on the list when it was not contributing data.
Yesterday, the industry body clarified that it 'receives daily contribution of rates to Sibor from 12 banks', but did not disclose which banks have dropped out.
It said in an e-mail statement: 'According to the ABS Market Fixings Governance and Procedures, the minimum number of banks to quote a rate is 12. The formula to drop off the top and bottom quartiles remains. Now with 12 banks, we take the mean rate of six banks. Earlier in February, we had more banks quoting the rate and the mean was calculated with eight banks.'
Every day, contributing banks submit rates at which they think they can borrow funds from other banks. Thomson Reuters eliminates the top and bottom 25 per cent before averaging the rest to derive the day's Sibor.
On Monday, ABS said submissions for Sibor are voluntary, and that contributing banks need not give a reason for exiting the panel.
One bank which has stopped contributing is the Royal Bank of Scotland (RBS). It notified ABS in late April that it would no longer contribute and stopped sending in its daily rates on May 31.
Industry sources say the bank's decision was made to prioritise its resources on areas where it believes it has the greatest potential for sustainable growth.
With the dwindling number of contributors, some industry players are worried that the Sibor will become more volatile as it becomes more susceptible to price discrepancies between the banks.
However, Bank of America Merrill Lynch economist Chua Hak Bin said that so long as the banks with large Singdollar deposit bases remain contributors to Sibor, it should not matter that much.
The three local banks, as well as Standard Chartered Bank and Citibank, contribute daily.
'Twelve is still a sufficiently large number and by the process of cutting away the tails it reduces the risk of volatile number. It would be ideal if there was a more transparent process. The Sibor is a very important benchmark for pricing, and especially mortgage markets,' said Dr Chua.
MAGDALEN NG