On 29 July 2014, the Monetary Authority of Singapore (MAS) published a consultation paper on the proposed regulation for financial benchmarks, along with a response to the feedback received during the initial phase of public consultation held in 2013.
The proposed regulation on financial benchmarks in Singapore is unmistakably an offshoot from the FCA’s approach focusing on key benchmarks. MAS intends to impose heavy requirements only for two designated benchmarks: the Singapore Interbank Offered Rate (SIBOR) and the Swap Offer Rate (SOR). As one would expect, most of the requirements are derived from the IOSCO principles on financial benchmarks. Nevertheless, the proposed regulation reveals a few particular outbreaks compared to the IOSCO principles, the FCA approach, or even compared to the EU proposed regulation on the topic.
Under MAS’ framework, each of the entities carrying out a defined activity (e.g. controlling the methodology, performing the calculation) related to a designated benchmark would need to be registered. Ordinarily only the administrator needs to be authorised, even though the benchmark administrator delegates certain tasks.
The language used in the definition of a benchmark is considerably narrowed down compared to the original proposal. It now covers only the benchmarks which are made available to the public. This change is perfectly sensible and in line with IOSCO’s definition. What is particular is that MAS went a step further by explicitly excluding certain benchmarks from the scope of the regulation, such as proprietary benchmarks and single bank administered rates used for pricing decisions in connection with loans. Criminal and civil sanctions would be imposed for manipulation of any benchmark within the scope of the definition.
MAS initially intended to impose best practice guidelines for financial institutions, where only IOSCO compliant benchmarks would have been used as a reference in financial instruments and products. MAS will not issue the guidelines, recognising that it would have imposed a heavy burden on financial institutions. Nonetheless, MAS encourages the firms to take into consideration IOSCO principles when choosing financial benchmarks.
Perhaps this is a more sensible approach than the catch-all approach envisioned by the EU, where all the benchmark administrators within the scope of the definition would need to seek for authorisation and abide by a large set of requirements akin to IOSCO principles on financial benchmarks.
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