Singapore’s three-month interbank loan rate fell the most in 11 months as record economic growth on the island and signs of expansion globally bolstered confidence in the nation’s lenders.

 

So-called Sibor, which banks charge each other to borrow in U.S. dollars, fell 1.4 basis points to 0.466% when the rate was fixed at 11 a.m. local time. The decline, the largest since Aug. 31, brought the figure to the lowest level since May.

 

Yields worldwide indicate investors are becoming more willing to lend as economies expand. Singapore’s economy is vying to be the world’s fastest-expanding in 2010 as rising demand for goods and services prompted the government to raise growth forecasts three times this year.

 

“Bank risk has diminished,” said Andy Cossor, Hong Kong- based chief market strategist for Asia at DZ Bank AG, Germany’s fifth-largest lender. “Asian banks in general are in better health than banks in other parts of the world.”

 

The global financial crisis that started with the collapse of the U.S. property market in 2007 has triggered US$42.6 billion ($58 billion) of writedowns and credit losses at banks and other financial institutions in Asia, according to Bloomberg data. Losses totaled US$1.19 trillion in the U.S. and US$569.5 billion in Europe.

 

Falling rates have a downside for Singapore’s banks. The three-month local-currency interbank lending rate has averaged 0.6% in 2010, versus 1.93% over the past five years. The decline shrinks lending profit at local banks including DBS Group Holdings, United Overseas Bank and Oversea-Chinese banking Corp.

 

Singapore employers added jobs for a fourth consecutive quarter in the April-through-June period, the Ministry of Manpower said July 30. Economic growth accelerated to 18.1% in the first half, the fastest pace since government records began in 1975, vying with Qatar for the quickest expansion this year.

 

The three-month London interbank offered rate for dollars, known as Libor, fell for a 13th day on July 30 to 0.454%. The TED spread, the difference between what banks and the U.S. pay to borrow for three months, narrowed to 31 basis points, also the least since May.

 

The U.S. reported July 30 that growth in the world’s largest economy slowed to 2.4% in the second quarter from 3.7% in the first, quelling concerns the nation is headed for a recession.