LONDON: On June 30, British bank NatWest sent out an arcane-sounding press release: bus operator National Express had become the first company to take out a loan based on Sonia, a replacement for scandal-hit interest rate benchmark Libor.
But replacing Libor is proving expensive and tricky with concerns that, if mishandled, it could trigger credit market confusion and waves of lawsuits, finance industry sources said.With no obvious alternative, some countries are adopting their own benchmarks. The United States is leading the way with a booming trade in derivatives linked to its new Sofr rate, while the European Central Bank started publishing Estr, its new interest rate benchmark, earlier this month.
Sonia, the sterling overnight index average, is based on the average of interest rates banks pay to borrow sterling from one another outside market hours, and is published at 9:00 a.m. local time daily, after the transactions have been vetted by the Bank of England. The overnight Sonia rate, based on actual transactions, is seen as more robust and less vulnerable to the kind of manipulation that affected Libor, which was based on rates submitted by banks.
"If you get this wrong, this is PPI for investment banking- if you haven't communicated properly and you move a customer and benefit, there could be a case where this gets reviewed and you owe your client a lot," he said. Banks face large costs for adapting systems and educating thousands of relationship managers on the merits of Sonia over Libor.
Never heard of It's literally one of my most important browser bookmarks for years!
Singapore Latest News, Singapore Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Source: ChannelNewsAsia - 🏆 6. / 66 Read more »
Source: The Straits Times - 🏆 8. / 63 Read more »
Source: ChannelNewsAsia - 🏆 6. / 66 Read more »
Source: ChannelNewsAsia - 🏆 6. / 66 Read more »
Source: YahooSG - 🏆 3. / 71 Read more »
Source: The Straits Times - 🏆 8. / 63 Read more »