Bankers’ group to ratchet up oversight of Tibor

Bloomberg

The Japanese Bankers Association will step up oversight of the country’s benchmark interbank lending rates as part of global efforts to tighten supervision in the wake of the Libor rate-rigging scandal.

The association will revise rules for the Tokyo interbank offered rate, or Tibor, and put them in a code of conduct that banks must observe when they make submissions, it said in a statement on its website Friday. It’s also considering measures such as setting up an independent oversight panel and requiring external audits, the group said.

Global regulators are attempting to repair or replace benchmark rates following the scandal that led to $2.5 billion in fines for UBS, Barclays and Royal Bank of Scotland Group. Japan’s regulator has punished RBS, UBS and Citigroup for attempts to manipulate rates.

The industry group said it will consider reducing the number of Tibor rates, in accordance with similar discussions abroad to trim tenors of other major international benchmarks. It didn’t give a time frame. There are 13 maturities for yen and euroyen Tibor, according to the association’s website. Euroyen refers to yen held in overseas banks.

The head of the local RBS brokerage resigned in April after the Financial Services Agency ordered the unit to improve operations following attempts to manipulate benchmark rates. The FSA told Citigroup and UBS to suspend trading linked to Libor and Tibor in January 2012 after finding that employees tried to influence benchmark rates.

The Japanese Bankers Association sets Tibor based on submissions from 15 banks for yen and 14 lenders for euroyen, according to its website. Last August, it said it found no discrepancies in rate setting after reviewing responses from banks to ensure they followed its guidelines.

The International Organization of Securities Commissions, which brings together financial regulators from more than 100 nations, is working on principles for benchmark setting.

The Financial Stability Board, a global regulatory group, said last month that it chose Martin Wheatley, head of the U.K.’s Financial Conduct Authority, and Federal Reserve Gov. Jeremy Stein to lead a probe into “options for robust reference rates.”

Singapore’s monetary authority last month censured 20 banks for attempting to fix interest rate levels in the island state and ordered them to set aside as much as $9.6 billion.