Singapore banks to stop setting Indonesia FX reference rate

Singapore banks to stop setting Indonesia FX reference rate

Tuesday, February 18, 2014 – 21:04


SINGAPORE – Banks in Singapore are to stop setting a reference rate for the Indonesian rupiah, the local banking and foreign exchange associations said on Tuesday, eight months after 20 banks were censured for trying to rig benchmark rates in the city-state.

Singapore’s foreign exchange market came under pressure last year after the central bank found 133 traders had tried to manipulate borrowing and currency rates, some of which were used to price derivatives linked to other Southeast Asian currencies.

The move came against a backdrop of a global crackdown on rate-rigging, that started with the Libor scandal in 2010 and has since spread to the foreign exchange and commodity markets.

The attempted manipulation in Singapore attracted the attention of neighbouring central banks, who for years have held concerns about the impact of offshore speculation on their own currency markets.

Banks in the city-state stopped setting a reference rate for the Malaysian ringgit last year and rely now on one set by banks in Malaysia instead, but continued to set one for the rupiah as there was concern about the reliability of the onshore rate.

The Singapore Foreign Exchange Market Committee (SFEMC) now recommends that banks instead use the IDR JISDOR (Jakarta Interbank Spot Dollar Rate), which is published by Indonesia’s central bank. “This change reflects the industry’s guiding principle that where a suitable alternative benchmark exists, it should be used,” the Association of Banks in Singapore said in a statement.

The rupiah reference rate is mainly used to price derivatives known as non-deliverable forwards, which are used by companies and investors seeking to hedge currency risk in countries where capital controls restrict foreign money flows.

The average daily volume in the rupiah NDF market was estimated by HSBC to be between $500 million (S$631 million) and $700 million in 2012.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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