Bangladesh Bank is launching two money-market reference rates based on actual transaction data to help stakeholders understand the trend in interest rates.
The central bank will be uploading the rates -- Bangladesh Overnight Financing Rate (BOFR) and Dhaka Overnight Money Market Rate (DOMMR) on the BB website regularly from April 15, the banking regulator informed reporters at a press conference Monday.
At the press meet arranged by BB's Debt Management Department (DMD) at its headquarters, DMD director Istequemal Hussain said Bangladesh Foreign Exchange Dealers Association (BAFEDA) has released Dhaka Interbank Offered Rate (DIBOR) since 2010 but it was based on offer rates submitted by banks and many banks did not provide data regularly, meaning the rate often failed to reflect the true market scenarios.
To overcome these limitations, the regulator decided to introduce two new benchmark rates using its automated system and real transaction data regularly from April 15 next, he said.
These rates, he further explains, will not depend on the preference of any individual bank but calculated using a volume-weighted mean, reflecting the average based on actual transactions.
"For BOFR, overnight and one-week tenures will be published while DOMMR will be released based on transaction data of overnight, 1-week, 1-month, and 3-month tenures," he says.)
To prevent effects of abnormal or outlier transactions from distorting the rates, Mr Hussain says, statistical techniques such as outlier management will be applied. "It will help reflect actual transaction scenario of the market."
He says banks, financial institutions, investors and other stakeholders will be able to get the benchmark rates in the morning of each business day and it can be used for any financial contract, evaluation of products and risk management.
And this move will help create a reliable benchmark for fixing interest rate on Bangladesh's financial market, which is believed to play an important role in bringing transparency and discipline in the market, according to him.
Assistant spokesperson for BB Mohammad Shahriar Siddiqui was also present at the press meet.
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