Industry group to scrutinise Hibor fixing

PUBLISHED : Friday, 20 July, 2012, 12:00am
UPDATED : Friday, 20 July, 2012, 12:00am


The Hong Kong Association of Banks is reviewing the fixing procedures and governance structures of the Hong Kong interbank offered rate (Hibor), following intense central bank scrutiny of the mechanism used for the London interbank offered rate (Libor).

'In light of related incidents in other markets, the HKAB has decided to initiate a review of the fixing mechanism and governance structure of the Hong Kong dollar Hibor. The HKMA supports this review and will monitor closely its process and outcome,'' a Hong Kong Monetary Authority spokeswoman said yesterday, referring to a widening probe into Libor, a US dollar benchmark for trillions of dollars worth of financial products.

'Hong Kong dollar Hibor fixing has been in place for over 20 years. We have not observed any anomaly in its operation,'' the spokeswoman said.

Hibor is the benchmark for a range of Hong Kong dollar-denominated products, including corporate loans, credit cards and home mortgages.

The Libor probe has already claimed the scalp of Robert Diamond, who resigned as chief executive of Barclays after the bank was fined GBP290 million (HK$3.5 billion) for manipulating Libor between 2005 and 2009.

Both the Parliament and the European Commission, the EU's executive arm, are seeking to make abuse of interbank rates punishable by criminal sanctions, Bloomberg reported yesterday.

Hibor, with maturities ranging from overnight to 12 months, refers to the interest rates at which banks borrow from each other in Hong Kong's interbank market. It is fixed at 11am every business day based on quotations provided by 20 banks, including HSBC, Citibank and other big players. In calculating the rate, the middle 14 quotations are averaged .

The 20 banks are selected by the HKAB and reviewed every two years. RBS, one of the 20 banks in the Hibor group, told the association in April that it would stop taking part in Hibor setting later this year.

Bank association chairwoman Anita Fung Yuen-mei said the performance of Hibor setting was reviewed regularly. 'HKAB will continue to work with the Treasury Markets Association to ensure the system continues to work effectively,'' she said.

Hang Seng Bank executive director Andrew Fung said: 'Hibor fixing is healthy because the difference between the highest and the lowest quotes isn't significant,'' he said.

'It's normal that quotes are not unique because reference banks can be lenders or borrowers, and credit ratings can differ too. It's useful to have a health check in the light of the Libor probe, but I don't think any major changes in the mechanism are needed.''

Wing Lung Bank, which is not one of the 20 Hibor-setting banks, suggested enlarging the group.