Interbank bond repo rates have been based on actual transactions for over 20 years, the PBOC said, pledging to enhance its benchmark interest rate system.
The PBOC (People’s Bank of China) has pledged to improve its benchmark interest rate system as part of efforts to align with international efforts ahead of the end of LIBOR at the end of 2021.
“Some banks in China have carried out foreign currency services such as USD based on LIBOR pricing, and are also facing the problem of benchmark interest rate conversion,” the PBOC said in a statement.
As such, the PBOC says it has formulated a roadmap and timetable for domestic benchmark conversion, based on international consensus. The plan includes the application of new benchmark interest rates, the promotion of benchmark conversion for newly signed contracts, and the exploration of benchmark conversion plans for stock contracts.
While China commenced benchmark reforms late, it has a “clear first-mover advantage” as interbank bond repo rates (DR) have been based on actual transactions over 20 years, the PBOC said.
The PBOC intends to promote the use of interbank repo rates in financial products including floating-rate bonds and floating-rate interbank certificates of deposit.
Foreign institutions are likewise encouraged to use China interbank repo rates for yuan-denominated assets, the central bank said.
The PBOC has released a whitepaper setting out its benchmark reform plans, available here (Chinese).