The Asian rate fixing scandal: continuing lessons for organisational culture

Written by James Thomas on Tuesday March 12, 2013

We’ve been covering the topic of “culture” extensively within inCOMPLIANCE. And with good reason – cultural change at banks is increasingly being acknowledged as a board-level strategic challenge, and one which the compliance community can make a positive contribution towards.

The Asian rate-fixing saga provides yet another cautionary tale – as if one were needed – of the scale of regulatory, reputational and – most recently – litigation risks resulting from dysfunctional organisational culture. It has also provided more plot twists than a bad soap opera, so it’s worth a recap on the action to date.

In the wake of the ongoing LIBOR scandal, similar investigations were launched on suspicion that Asian interbank lending rates – including SIBOR (the Singapore Interbank Offered Rate) and HIBOR (the Hong Kong Interbank Offered Rate) – were also being rigged. And the issue has snowballed. Having been required by the Monetary Authority of Singapore to conduct internal reviews into rate fixing, banks in Singapore uncovered evidence of not only SIBOR manipulation, but also manipulation within the foreign exchange market of exchange and interest rates used for benchmarking.

Banks including UBS and JP Morgan have withdrawn from some rate setting panels. Moreover, internal reviews have reportedly resulted in staff at banks – including Deutsche Bank, RBS, Standard Chartered and UBS – being suspended and, in some cases, dismissed. In the latest development, former staff of UBS have sued the bank for unfair dismissal, as last month two former UBS employees in Singapore filed lawsuits at Singapore’s High Court, claiming that they were sacked to “cover up [the bank’s] role in the growing scandal related to alleged fixing of rates”

Within the scandal to date, the prospects of regulatory sanction and reputational damage have been well documented (for example, UBS itself being fined £940m by US, UK and Swiss regulators for its role in LIBOR-rigging). Litigation risk and its associated costs have been perhaps a secondary concern, but these lawsuits mark it out as yet another impact that cultural failings can have on a financial institution.

As rapidly as the scandal has evolved, it remains some way from a conclusion. For the banks involved, this represents an ongoing financial, regulatory and reputational burden. For compliance professionals, however, it provides a potent case study of the value of replacing a “culture of gaming” with a culture of compliance.


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