The Council of Financial Regulators has released a discussion paper on the methodology for agreeing the daily rates for Bank Bill Swap Rates. The closing date for submissions is 3 December 2015.
BBSW is a key financial benchmark in Australia and is administered by the Australian Financial Markets Association. BBSW rates serve as reference rates for pricing many debt securities and lending transactions and are also used to determine payment obligations on a range of derivatives. Benchmark interest rates around the globe have come under scrutiny in recent years with a range of fixing scandals and multi-billion dollar fines handed out to banks that participated in the rigging. YieldReport has published a number of articles regarding this ongoing scandal that may be accessed using the links below. There is also an Insight article explain what BBSW is and what it is used for.
In light of the global scandals, BBSW was reformed in 2013 with the intention of improving its reliability by moving from a submissions-based to a market data-based benchmark. To ensure that BBSW remains a trusted, reliable and robust financial benchmark going forward, the CFR has recommended that a consultation be undertaken with market participants on the future methodology for BBSW. The consultation paper presents options and invites views on how the BBSW methodology could evolve going forward.
Who is the CFR?
The little-known Council of Financial Regulators is the coordinating body for Australia’s main financial regulatory agencies with membership comprising of: the RBA; APRA; ASIC; and the Treasury. It meets with meetings chaired by the RBA governor and while non-statutory with no-legal functions or separate powers has a guiding role in the stability of Australia’s financial system.