Bank swap rate needs to be trusted: RBA
A Reserve Bank official has refused to comment about any alleged manipulation of the rate at which banks lend money to each other, but says markets need to have confidence in their integrity.
RBA assistant governor for financial markets Guy Debelle wouldn’t to be drawn on the Australian Securities and Investments Commission’s three-year investigation into alleged interest rate rigging by the big banks.
The corporate watchdog’s investigation into the bank bill swap rate (BBSW) is nearing the finish line, and ANZ also won’t comment on speculation that it could soon face legal action.
“I will not talk about the investigations that ASIC is currently undertaking into conduct around BBSW,” Dr Debelle said.
The BBSW is the daily interest rate set by banks for day-to-day inter-bank business and is the basis for pricing commercial loans.
Dr Debelle said interest rate benchmarks such as the BBSW are a critical part of the plumbing of the financial system.
“Market participants need to have confidence in their robustness and integrity,” he told the KangaNews DCM Summit in Sydney on Monday.
“Without that, we have a serious problem, given its integral role in the infrastructure of domestic financial markets.”
In recent months, the Council of Financial Regulators (CFR) has been looking into possible reforms to the BBSW to ensure it is trustworthy and reliable.
Plans are also under way to introduce a risk-free interest rate for the domestic market, as a complement to the BBSW.
Dr Debelle said he’s in favour of a benchmark risk-free rate, because the BBSW embodies perceptions of credit risk.