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Why you should not buy IPOs As Sheng Siong is launching its IPO next month, I expected a few calls as whenever an IPO is launching. And if you are my client, you know my answer. I decide to write this article so everybody can benefit...

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Questions to ask your Financial Adviser Every Sunday morning when I read the newspapers, I always see articles or advertisements regarding "Financial Advisers". Nowadays, just like the once prestigious word "Banker", which is misused in the...

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Revision to Nomination of Insurance Nominees Regulation With the onset of the Mental Capacity Act ("MCA") coming into effect on 1st March 2010, the Insurance (Nomination of Beneficiaries) Regulations 2009 ("the Regulations") will be amended to effect 2 changes: The...

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The ABCs of the Financial Advisers Act The title, Financial Adviser, is always mis-used in the industry and misunderstood by the consumers. On 10 October 2002, the Financial Advisers Act came into effect and all financial institutions are...

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Moratorium Underwriting by Aviva It is a common that insurance companies do not cover pre-existing condition. Typically, pre-existing conditions will be excluded with little or no chance of them being covered, even after a number of treatment-free...

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The Importance of Libor and Sibor

Posted by Ivan Guan | Posted on 05-07-2012

Category : Interest Rate, Investment

Tags: ,

The recent Barclays role in the LIBOR scandal brought a fine of £290 million (S$572.6 million) last week and has already claimed the scalps of chief executive Bob Diamond and others. Several other banks in London have also been implicated.

You may give a yawn to the news but you may not be aware of the impact of interest rate on your personal finances and lifestyles. What happens in the interest rate market affects many aspects of your everyday life in home mortgages, investments, jobs, the economy and even politics.

The LIBOR (London Interbank Offered Rate) is the rate at which the world’s most preferred borrowers are able to borrow money day to day. It is derived from a filtered average of the world’s most creditworthy banks’ (not quite so now) interbank deposit rates for larger loans. In another word, the benchmark of the financial market in the world is set by a few institutions.

Similarly, the rate used in Singapore is called SIBOR (Singapore Interbank Offered Rate) which is set by the Association of Banks in Singapore (ABS).

THERE are 15 banks contributing data to set the Singapore Interbank Offered Rate (Sibor) for the financial year ending March 31, 2013:

  • Bank of America
  • Bank of Tokyo-Mitsubishi UFJ
  • BNP Paribas
  • CA-CIB
  • Citibank
  • Credit Suisse
  • DBS
  • Deutsche Bank
  • HSBC
  • ING
  • JPMorgan Ch!se
  • OCBC
  • RBS
  • Standard Chartered
  • UOB

Most of the mortgage loan packages in Singapore are linked to Sibor. Since majority of Singaporeans use their life savings to pay their houses and interests,  the movement of Sibor will have severe impact on everybody. If you ever think interest rate is as stable as recent years, you will be shocked to know historically, from 1988 until 2012, Singapore Interest Rate averaged 1.70% reaching an all time high of 20% in January of 1990 and a record low of -0.75% in October of 1993.

Fortunately or unfortunately, the relatively small size of the Singapore housing loans market suggests that banks here are unlikely to have enough incentive to risk rigging Sibor. As pointed by ABS director Ong-Ang Ai Boon in today’s news article “Rigging of Sibor ‘is highly unlikely’”, “Sibor is domestic and just for limited usage… it is not an international benchmarking rate, unlike Libor.“

What is LIBOR

Posted by Ivan Guan | Posted on 17-02-2008

Category : Financial Terms

Tags: , ,

LIBOR stands for London Interbank Offered Rate, an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market.

The LIBOR is fixed on a daily basis by the British Bankers’ Association, and is quoted for 30-day, 60-day, 90-day, 180-day, or 360-day (1-year) terms. The LIBOR is derived from a filtered average of the world’s most creditworthy banks’ interbank deposit rates for larger loans with maturities between overnight and one full year.

The LIBOR is the world’s most widely used benchmark for short-term interest rates. It’s important because it is the rate at which the world’s most preferred borrowers are able to borrow money. It is also the rate upon which rates for less preferred borrowers are based. For example, a multinational corporation with a very good credit rating may be able to borrow money for one year at LIBOR plus 4 or 5 points.

Countries that rely on the LIBOR for a reference rate include the United States, Canada, Switzerland and England.

In Singapore, a similiar term Singapore Inter-Bank Offered Rate (Sibor) is more commonly used.