“Banks are leaving the panel that sets ISDAFix, the benchmark for the $379 trillion swaps market, as regulators probe suspected manipulation of the rate.
HSBC Holdings Plc (HSBA), Europe’s largest bank by assets, and Japan’s Mizuho Financial Group (8411) stopped contributing to the ISDAFix dollar rate between November and January, and haven’t been replaced, documents on the International Swaps and Derivatives Association’s website show. The industry group didn’t give any reason for the lenders’ departure.
Firms are pulling out of rates such as the London interbank offered rate, Euribor and ISDAFix on growing concern that they may face lawsuits, fines and criminal penalties if found to have engaged in wrongdoing. Without data from a large number of firms, benchmarks risk becoming unrepresentative and losing the confidence of the market, said Owen Watkins, a former regulator at the U.K.’s Financial Services Authority.
Banks across the industry are “concerned about the regulatory scrutiny and they don’t see any upside,” said Watkins, who’s now a lawyer at Lewis Silkin LLP in London. “If it continues, the authorities would look to compel institutions to provide quotes, either through regulation or statute.”
Regulators including the U.S. Commodity Futures Trading Commission and the U.K.’s Financial Conduct Authority, one of the FSA’s successors, are working on a set of principles to govern all financial benchmarks after they fined Barclays Plc (BARC), UBS AG (UBSN) and Royal Bank of Scotland Group Plc more than $2.5 billion for rigging Libor. The CFTC has issued subpoenas to brokers at ICAP Plc (IAP) and as many as 15 banks amid allegations ISDAFix was rigged, Bloomberg News reported on April 8….”
If you enjoy the content at iBankCoin, please follow us on Twitter
