This report was released by a Working Group established last September by the Economic Consultative Committee (ECC). Chaired by Hiroshi Nakaso, the Working Group comprised officials from 13 central banks and monetary authorities.
The report reviews issues in relation to the use and production of reference interest rates from the perspective of central banks. These issues reflect the possible risks for monetary policy transmission and financial stability that may arise from deficiencies in the design of reference interest rates, market abuse, or from market participants using reference interest rates which embody economic exposures other than the ones they actually want or need.
In parallel to initiatives in other forums and jurisdictions, including work by the International Organisation of Securities Commissions (IOSCO), the European Banking Authority (EBA)/European Securities and Markets Authority (ESMA) and the UK Wheatley Review, the report provides recommendations on how to improve reference rate practices from a central bank perspective.
The Working Group identifies an urgent need to strengthen the reliability and robustness of existing reference rates and a strong case for enhancing reference rate choice. Both call for prompt action by the private and the public sector.
Sir Mervyn King, Chairman of the ECC and the Global Economy Meeting and Governor of the Bank of England, said: "The report released today makes a significant contribution to the ongoing examination of reference rates used in financial markets. It is clear that central banks must play an important role in supporting the development of alternative reference rates."
The Working Group was set up last September to examine reference rates used in financial markets and to consult with the market in order to provide input into the broader official debate coordinated by the Financial Stability Board.
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