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Bonuses paid to Singapore banks for selling risky debt under scrutiny

Bloomberg Published on Thu, Aug 25, 2016 / 2:58 PM GMT+8

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SINGAPORE (Aug 25): Singapore’s private banks are coming under scrutiny for earning bonuses by selling risky debt, as the city sees an unprecedented wave of defaults. The central bank says an industry group is reviewing the practice.

Bond issuers offer banks rebates of as much as 1% as incentive to sell unrated securities, according to a Bloomberg News analysis of figures from bond-sale arrangers and compiled by analysts. The payments, which often aren’t explained to the banks’ clients, have stoked concerns of a conflict of interest, and Fidelity International has called for the practice to be abolished. At least half the $875 million of bonds that have failed since November were sold by private banks earning rebates.

The defaults have further shaken confidence in Singapore’s financial markets. A penny-stock crash, close ties between the local unit of a Swiss bank and a disgraced Malaysian state investment firm and raids on brokerages in a markewwt manipulation probe have kept authorities busy. Undeclared bonuses for selling poor quality debt raise another spectre. The Monetary Authority of Singapore said Thursday there’s scope for disclosure on rebates to be clarified.