Can Citibank unilaterally increase SIBOR loan’s spread? (2) – ST article - Borrowers upset over hike in margin for Sibor loans

Subsequently a better written news of this has been published in The Straits Times: 

“Borrowers upset over hike in margin for Sibor loans

Monday, Mar 30, 2015
Rachel Boon
The Straits Times

MANY home buyers with loans pegged to the Singapore Interbank Offered Rate (Sibor) have been hit with higher repayments following the Sibor's increase this year.

That is to be expected, but some Citibank customers have also found that the margin or spread - the added percentage banks tack on to the Sibor - has also moved up.

They were informed earlier this month that the spread on their Sibor-pegged loans would increase to 0.85 per cent from the promotional rate they had signed up with. The change takes effect from April 1.

Citibank said the spreads range from 0.6 to 0.8 per cent for customers who took up loans in late 2010 and in 2011.

One customer said he has been on a three-month Sibor loan since 2011 under a two-year lock-in package. His spread has risen from 0.7 per cent to 0.85 per cent.

However, Citibank said raising the spread has affected only a small number of people.

Mr Peng Chun Hsien, Citibank Singapore's head of secured finance solutions, also stressed that the "current revision is only applicable to clients outside the lock-in period".

Another customer, a Mr Lee, said he has been on a one-month Sibor home loan since 2011.

He told The Straits Times his spread has risen from 0.65 to 0.85 per cent but he had thought the spread would stay at 0.65 per cent throughout the loan.

Mr Peng told The Straits Times: "The word 'throughout' is a term the industry uses, and refers to the tenure and period that we are covering."

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Another client on a one-month Sibor said: "Sibor is already variable and has gone up by 100 per cent year on year. How can the spread be variable too?"

Finance industry experts say reviewing spreads is standard bank practice, but in practice, changing the spread during the loan period is uncommon.

The Straits Times understands that banks such as United Overseas Bank and OCBC Bank have not increased the spreads. A DBS Bank spokesman said DBS and POSB have not varied spreads while under an existing agreement with customers. He said an 0.85 per cent spread used to be the market rate but some banks have lowered it to attract customers.

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Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, said: "We are of the view that the banks should justify such rate changes clearly to the affected consumers. Such changes will not be fair to consumers if there is no justification to do so."

Citibank said it undertook "careful consideration of factors including prevailing market conditions" before making the move.

The Monetary Authority of Singapore (MAS) said it does not regulate the setting of interest rates but the banks must provide clear and relevant information on products and services, said a spokesman, adding that MAS has asked Citibank to review the customer feedback received.

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In online forum at CondoSingapore.com, 
some forumers had also voiced out that they had been affected by Citibank’s unilateral action. 

Several forumers there believed that Citibank’s arguments to ST journalist’ request for comments on the case is weak, and is pushing the limits of interpretation, and they felt that Citibank is just being despicable and acted against their contractual agreement.

The ST newspaper journalist had approached MAS and CASE for their response and as can be seen by the news reported, and apparently MAS and CASE are both unwilling to do anything about other than just talk only. In the online forum, a forumer has commented about his/her friend being affected and updating on his purse with Citibank: 

“He told me he is in touch with a Straits Times reporter who is "researching" this case. Also, MAS replied to him saying it is instructing Citi to officially respond to him. However according to him, MAS said it had no power to do anything and told him to go FIDRec if he is not satisfied with Citi's response/explanation. 
I personally found it unacceptable the authority did not take the stand of helping consumers to fight the bank. Although I am not surprised: the IB CHF case, MAS also said cannot do anything; even in Lehman note case, DBS customer in HK got better compensated than DBS customer in Singapore because the regulator in HK forced all the banks to compensate.”