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Bulletin article outlines recent developments in financial market benchmarks

Summary:
Release date 16 June 2017 An article published today in the Reserve Bank Bulletin provides an overview of the importance of benchmarks, which are used to price, value and evaluate financial market transactions. The Bulletin article notes the need for financial market benchmarks to be reliably measured, transparent and supported by strong governance arrangements. The article also explores the way that regulators worldwide are implementing reforms for interest rate benchmarking systems and processes. This follows the erosion in trust in benchmarks that occurred after the LIBOR scandal, where a number of international banks in London were found to have manipulated the LIBOR benchmark interest rates. Significant work has been undertaken in recent years

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Release date

16 June 2017

An article published today in the Reserve Bank Bulletin provides an overview of the importance of benchmarks, which are used to price, value and evaluate financial market transactions.

The Bulletin article notes the need for financial market benchmarks to be reliably measured, transparent and supported by strong governance arrangements. The article also explores the way that regulators worldwide are implementing reforms for interest rate benchmarking systems and processes. This follows the erosion in trust in benchmarks that occurred after the LIBOR scandal, where a number of international banks in London were found to have manipulated the LIBOR benchmark interest rates.

Significant work has been undertaken in recent years to improve the reliability, transparency, and governance in New Zealand’s key short-term interest rate benchmark, known as BKBM. The New Zealand Financial Markets Association has carried out this work and has generally brought BKBM in line with guiding principles published by the International Organization of Securities Commissions and Financial Stability Board.

The Bulletin article notes that significant declines in volumes traded during the BKBM rate set in recent years have raised concerns about the reliability of the BKBM as a benchmark rate. The Bulletin article discusses this trend as well as potential solutions for a recovery in the efficiency and liquidity of the New Zealand bank bill market.

More information

Read the Bulletin article.

Media contact:
Angus Barclay
External Communications Adviser
Ph 04 471 3698 or 027 337 1102
Email: [email protected]

Reserve Bank of New Zealand News Releases
The Reserve Bank of New Zealand is New Zealand’s central bank. We promote a sound and dynamic monetary and financial system.

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