Cost pressures and tougher regulation mean banks in Singapore are struggling to replace the 100 traders who left the market during a rate-fixing probe.
The world's fourth largest foreign exchange center is still reeling from the crackdown, which has left volumes flowing through banks' once vibrant interest rate and emerging market currency trading desks a long way below pre-scandal levels.
Regulatory probes have hit banks' trading businesses hard across the globe since the 2008 financial crisis. Singapore's rate probe followed a global scandal involving the London interbank trading benchmark, Libor, that unfolded last year.
Unlike other jurisdiction, where regulators fined and punished banks one-by-one, Singapore chose to mete out its punishment in one go, censuring a record 20 banks after finding 133 traders tried to manipulate lending and foreign exchange reference rates.
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Around three-quarters of those traders have left the market, and new regulatory background checks mean banks are having their work cut out bringing in replacements.
"Each hire is scrutinized due to the new regulations," said Martin Andres, head of sales and trading for Asia at recruitment firm Selby Jennings. "So it is more difficult to get top talent onboard, especially if they are within the proprietary trading units."
The Singapore regulator first ordered banks in the city-state to review benchmark borrowing rates nearly a year ago. That review was extended in September last year to foreign exchange benchmark rates used to price currency derivatives, particularly instruments known as non-deliverable forwards (NDFs).
Volumes in the interest rate and NDF markets will struggle to recover any time soon, according to brokers and analysts interviewed by Reuters.
"A lot of the NDF volumes dried up during the reviews," said one foreign exchange analyst, who asked not to be named as he was not permitted to discuss the reviews with the media. "It will take a long time to pick up again."
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Another analyst estimated that volumes in the rupiah NDF market dropped to around $200 million a day during the reviews, having been closer to $1 billion a year earlier.