Singapore may drop ringgit reference rate

SINGAPORE: Banks here will likely abandon their reference rate for the ringgit, a person with knowledge of the matter said, handing a victory to Bank Negara Malaysia as it seeks to control and deepen its onshore currency market.

Singapore's foreign exchange market has come under pressure for change since regulators, spurred by a global scandal over bankers rigging key lending rates, ordered reviews last year into various rates set by the city-state's banking association.

The probes uncovered attempts by traders to manipulate Singapore's rate fixings for certain currencies, fuelling the ire of central bankers in Malaysia and Indonesia who for years have held concerns about the impact of offshore speculation on their own spot currency markets.

The Association of Banks in Singapore, which is hammering out reforms to improve the integrity of its rate settings, is expected to adopt a plan that would end the daily publication of a ringgit spot price for settling derivative contracts, said the source.

A spokesman for the Association of Banks in Singapore declined to comment on the matter.

The Monetary Authority of Singapore provided no comment.

Malaysia's central bank, Bank Negara, also declined to comment.

No final decision has been made on whether to discontinue the offshore ringgit rate and discussions are continuing about how to reform the system, several banking sources involved in the process have said.

Even the consideration of dropping the offshore ringgit rate shows the pressure Singapore faces from its neighbours and the impact of the global regulatory push for greater transparency in over-the-counter derivatives.

The association has not shown any movement towards ending Singapore's rate fixing for the rupiah, which market players say lacks a reliable spot reference rate in its home country compared with Malaysia's reference rate for the ringgit.

Over the past two years, the Singapore fixing has consistently quoted the rupiah at rates against the dollar that are weaker than the onshore rates, with the spread widening as far as 250 rupiah at the start of this year. Reuters