Reforming STIBOR – pre-live data analysis results 

Statements

Over the past year, SFBF has been working on the development of a reviewed methodology for STIBOR. The evolved methodology continues to measure STIBOR’s underlying interest in a consistently accurate manner, aligned to the historical and intended use of the benchmark but in providing a more direct and transparent link to observable trade data the methodology is more robust, provides assurance to users and is designed to meet all applicable regulatory requirements. The revised methodology prioritises market transactions to the greatest extent possible and is composed of a three-level waterfall model.

In March 2021, SFBF published its Consultation Paper on the Evolution of STIBOR. In April 2021, an Analysis of Stakeholder Feedback was made available. This update is intended to build on those public notices and specifically to share the results of some analysis conducted.

During the eleven-week period between April 26 and July 9, 2021, SFBF conducted a data collection exercise with two main objectives: first, to provide the SFBF with a more accurate understanding of the impact of the new determination methodology on STIBOR’s value and volatility; second, to allow the accurate testing of the contribution and calculation infrastructure. Importantly, this period provided the necessary confidence to SFBF on the readiness of all Panel Banks to submit, on a daily basis, an accurate and timely account of their activity in the relevant segment of the money markets applied toward the daily calculation of STIBOR.

The table below shows an indicative measurement of the impacts on the rate’s value and volatility arising from changes in the calculation methodology during the period referred to above.

Table outlining the STIBOR indicative value and volatility table for the period Apr 26,2021 - Jul 9, 2021 comparing STIBOR and the reformed STIBOR (table published on 10 Nov 2021).

Table outlining the STIBOR indicative value and volatility table for the period Apr 26,2021 – Jul 9, 2021 comparing STIBOR and the reformed STIBOR (table published on 10 Nov 2021).

(Methodological note: volatility is measured as the standard deviation of the series of daily rate changes over the observed period.)

SFBF believes that these results corroborate the improved features of the proposed methodology, as set out in the March consultation paper, and serve as a firm basis for a transition toward the new methodology.