Frontpage News 2014 CIBOR: New experim...

CIBOR: New experimental scheme between submitters

11 April 2014

As a part of the ongoing evaluation of CIBOR, the Danish Bankers Association has developed a new scheme to make CIBOR quotas tradable. The scheme provides CIBOR reporting to act on the other CIBOR submitters quotations. The work on the scheme has now come so far, that a trial period is established from 1 May to 1 September 2014.

To ensure the most robust set-up for CIBOR as possible, the Danish Bankers Association continuously assesses if initiatives that can strengthen CIBOR can be established. CIBOR expresses the interest rate that a bank is willing to lend in Danish Kroner to a so-called prime bank without collateral.

For many years, there has been a clear tendency that inter-bank loans on an unsecured basis, i.e. without collateral, have been significantly decreasing. This trend accelerated as a result of the financial crisis. Today, there is only limited lending between banks without collateral in the longer maturities.
 
As a part of the ongoing evaluation of CIBOR, the Danish Bankers Associa-tion has therefore developed a system whereby CIBOR submitters get the opportunity to trade on the other CIBOR submitters’ quotations.
 
Only CIBOR submitters can be included in the scheme. The work on making the CIBOR quotations tradable is inspired by the Swedish STIBOR, which has also established a similar scheme.
 
The work on the scheme has now come so far that a trial period will be established from 1 May to 1 September 201 to evaluate the scheme, including whether adjustments must be made or if it can be made permanent.
 
CIBOR will continually be fixed on the same basis on which it is fixed today. The underlying inter-bank scheme relates to the first ten minutes after the publication of CIBOR, and it e.g. takes into account that not all CIBOR submitters are prime banks. The scheme includes loans as well as deposits, where the deposit interest rate is determined from an arranged spread minus the interest rate on loans.
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