I REFER to last Friday's article, 'Central banks cut rates to save economy', which reported that the Bank of England and the European Central Bank cut interest rates by 50 basis points to record lows of 0.5 per cent and 1.5 per cent respectively.

In other reports, Malaysia cut rates to a record low of 2.5 per cent and the Philippines slashed rates to 4.75 per cent. Hong Kong, Taiwan, South Korea, Japan and others have also cut their interest rates, some several times, since the global financial crisis unfolded last September.

In the United States, the Federal Reserve has lowered rates from more than 5 per cent two years ago to near zero today.

In Singapore, Minister Mentor Lee Kuan Yew has raised the spectre of a 10 per cent drop in this year's gross domestic product. A bank economist has estimated that 100,000 jobs could be shed this year, the highest in our history. Singapore is in its worst recession, even more terrible than in 1985, 2001 and 2003.

Yet I watch with amazement and disbelief as the oligopolistic banks in Singapore hold the prime lending rate steady at 5 per cent, unchanged for more than 10 years. Board rates, which determine the final mortgage rate home owners have to pay, have similarly been kept unchanged.

Thus it comes as no surprise to read that all banks have made profits from their Singapore operations in their latest result announcements, albeit lower than in previous quarters, with Standard Chartered Bank actually making record profits. All this while smaller companies are folding around them, and job losses escalating.

Why do banks, both local and foreign, not lower prime and mortgage rates? And why does the watchdog, the Monetary Authority of Singapore, allow this situation to continue? Can it not force banks to lower their rates? Yet over the past six months, banks have steadily reduced only the savings rate, thus increasing their margins.

Traditionally, our interest rates have been lower than Malaysia's for as long as I can remember. Today, Malaysia's rate is way lower than ours.

Zhang Bao Guang

This article was first published in The Straits Times.