Recent rate rigging scandals in the UK and Singapore could rebound on Australia with profound effects. The Basel-based Financial Stability Board has established a steering committee of central banks and regulators to review how key interest rate benchmarks are set around the world. Singapore’s bank regulator recently censured banks including ANZ and Macquarie Bank for attempting to fix Sibor, the Singapore Interbank Offered Rate, which came hot on the heels of a raft of UK banks being found guilty of rigging Libor, the London Interbank Offered Rate.
Australia’s equivalent of Libor, the bank bill swap rate (BBSW), is the benchmark rate at which banks lend to each other. BBSW has been affected already by these developments as global banks with a presence in the domestic Australian market pull out of the BBSW-setting panel: HSBC and Citi have already withdrawn. This has led APRA, the Australian Prudential Regulation Authority, to look at the way that interest rates are set and instigate a system to set the rate automatically using electronic data drawn from financial markets.
In a related move, the Reserve Bank of New Zealand is planning to create a Monetary Policy Committee, although ultimate responsibility for decisions on the Official Cash Rate will remain with the governor of the central bank.