RBI to check benchmark rates?
MUMBAI: The Reserve Bank of India (RBI) has asked the government to amend laws to empower the central bank with powers to regulate benchmark rates. The move comes in the wake of the Libor scandal in Europe where regulators have penalized leading banks for 'fixing' the benchmark London Interbank Offered Rate by providing misleading quotes.
Following the Libor scandal, UK announced that the Libor is a regulated activity by the Financial Services Authority under UK's Financial Services and Markets Act, 2000 with effect from April, 2013. The Monetary Authority of Singapore (MAS) announced a proposed regulatory framework for financial benchmarks in June, 2013, which will introduce specific criminal and civil sanctions under the Securities and Futures Act for manipulation of any financial benchmark.
As part of this international initiative, RBI had constituted a panel to suggest ways in which the integrity for market-determined benchmarks rates in India could be ensured. Besides forming the basis for transactions in the money markets, benchmark rates such as Mibor directly affect customers as some corporates link their borrowing costs to the interbank rate.
The panel headed by P Vijaya Bhaskar, executive director, has suggested that amendments in the RBI Act should empower RBI to determine policy with regard to benchmarks used in money, G-Sec, credit and foreign exchange markets in India and to issue binding directions to the benchmark administrators, calculation agents, submitters, users and such other agencies. The amendments would also empower RBI to call for information and inspect such agencies and to impose penalty for violation of its directions in order to ensure credibility of the benchmarks for securing stability of the financial system of the country.
The benchmark administrator refers to agencies such the Foreign Exchange Dealers Association of India (Fedai) and the Fixed Income Money Market and Derivatives Association (Fimmda). At present, these two dealers' associations obtain quotes from members (largely banks and primary dealers) and compute benchmark rates such as Mibor and spot fixing rates by Fedai.
To ensure that there is no fixing of the benchmark rates, RBI has said that calculation of the benchmark should be based on observable transactions. Also, the executable bids and offers should be used as second- and third-layer inputs in the hierarchy of inputs while calculating the benchmark rate.
Source » TOI
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
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Following the Libor scandal, UK announced that the Libor is a regulated activity by the Financial Services Authority under UK's Financial Services and Markets Act, 2000 with effect from April, 2013. The Monetary Authority of Singapore (MAS) announced a proposed regulatory framework for financial benchmarks in June, 2013, which will introduce specific criminal and civil sanctions under the Securities and Futures Act for manipulation of any financial benchmark.
As part of this international initiative, RBI had constituted a panel to suggest ways in which the integrity for market-determined benchmarks rates in India could be ensured. Besides forming the basis for transactions in the money markets, benchmark rates such as Mibor directly affect customers as some corporates link their borrowing costs to the interbank rate.
The panel headed by P Vijaya Bhaskar, executive director, has suggested that amendments in the RBI Act should empower RBI to determine policy with regard to benchmarks used in money, G-Sec, credit and foreign exchange markets in India and to issue binding directions to the benchmark administrators, calculation agents, submitters, users and such other agencies. The amendments would also empower RBI to call for information and inspect such agencies and to impose penalty for violation of its directions in order to ensure credibility of the benchmarks for securing stability of the financial system of the country.
The benchmark administrator refers to agencies such the Foreign Exchange Dealers Association of India (Fedai) and the Fixed Income Money Market and Derivatives Association (Fimmda). At present, these two dealers' associations obtain quotes from members (largely banks and primary dealers) and compute benchmark rates such as Mibor and spot fixing rates by Fedai.
To ensure that there is no fixing of the benchmark rates, RBI has said that calculation of the benchmark should be based on observable transactions. Also, the executable bids and offers should be used as second- and third-layer inputs in the hierarchy of inputs while calculating the benchmark rate.
Source » TOI
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
--
You received this message because you are subscribed to the Google Groups "Product Updates for AMC" group.
To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
For more options, visit https://groups.google.com/groups/opt_out.
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