STIBOR transitions to transaction based calculation methodology
STIBOR has been revised and fully transitioned to a transaction based calculation methodology which, in an automated and controlled manner, calculates the contributing banks’ cost of fund using the banks funding transactions. As STIBOR is an offered rate, a predetermined Bid to Offer Spread is added to the cost of funds to produce the STIBOR rates.
The transition to a transaction based calculation methodology was made on back of new requirements to align with the updated benchmark regulations. The STIBOR calculation methodology, which has remained relatively unchanged for the past decades, went through an extensive analysis and revision by SFBF in close collaboration with the panel banks.
Over the past 19 months, SFBF has been working on the development of a revised calculation methodology and a new calculation system to accommodate the revised calculation methodology in an automated and controlled manner to safeguard the integrity and robustness of the benchmark, based on actual funding transactions from contributing panel banks. The revised methodology continues to measure STIBOR’s underlying economic reality 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, transparent and provides assurance to users and is designed to meet applicable regulatory requirements.
Details on the transaction based STIBOR calculation methodology describing the revised methodology are available and published on the SFBF website library found here.
During the project SFBF designed and developed a new calculation system to accommodate the revised calculation methodology in an automated and controlled manner to safeguard the integrity and robustness of the benchmark. The system is capable of complex calculations and identifying erroneous input and manipulation attempts in tandem with supervision from contributors and SFBF oversight functions.
SFBF lodged an application for authorisation under the (EU) Benchmark Regulation (BMR) with the Swedish Financial Supervisory Authority during December 2021. STIBOR remains eligible and can be used for existing and new financial contracts, financial instruments or for measuring investment funds, during the application process as per BMR article 51.