JBA to implement stricter interbank monitoring reforms

Responding to rising public anger about benchmark rates rigging.

The Japanese Bankers Association, Japan’s banking industry group, said it will tighten monitoring of how its interbank lending rates are set in the wake of rate-rigging scandals worldwide, including Japan.

JBA will set up an independent monitoring body to oversee the operation of the Tokyo interbank offered rate, hire outside auditors to improve its transparency and scrap rarely used rates.

The reforms are similar to proposals announced in London and Singapore, but are not expected to be finalized until the International Organization of Securities Commissions announces its blueprint for how financial benchmarks should be regulated in the coming weeks.

Bank branches in Tokyo were found to have been at the heart of some Libor manipulation cases. Japanese subsidiaries of UBS and Royal Bank of Scotland have both pleaded guilty to charges of wire fraud filed by authorities in the United States in relation to the Libor cases.

In December 2011, Japan’s regulator forced UBS and Citigroup C.N to temporarily suspend some of their trading operations after it found some of their traders had tried to inappropriately influence Tibor rate submitters at other banks.

JBA, however, has not found any evidence of wrongdoing at the panels of banks that set its rates.