HIBOR being reviewed

Refinements meant to avoid LIBOR-type disaster.

The Treasury Markets Association has submitted recommendations for improving the robustness of the Hong Kong Interbank Offered Rate or HIBOR fixing mechanism.

The association forwarded a report reviewing HIBOR to the Hong Kong Association of Banks. The report concluded that the HIBOR fixing mechanism remains sound, but there is scope for refinement of this important local benchmark.

The TMA recommendations include providing clear rate submission guidance to reference banks which contribute rates for the fixing process, and entrusting the administrator role for HIBOR to a third party to enhance independence of the rate fixing process.

The report also recommends developing a code of conduct that includes rate submission guidance and sound practices for systems of control that reference banks should put in place. Such a code would be subject to endorsement by the Monetary Authority.

HKMA, which also received the report,welcomed the work by the two organisations to recommend enhancement measures. The Association of Banks will consult the industry on the report before presenting its own recommendations to HKMA by the end of this year.

HKMA reiterates that the market expects to see refining measures that will help increase the transparency of the fixing process, promote discipline and strengthen internal control amongst reference banks in submitting reference rates, and enhance governance for the fixing regime.