A new interest rate indicator, entitled the Shanghai Inter-bank
Offered Rate (SHIBOR), will come into operation on January 4, the
central bank announced in Beijing Wednesday. The mechanism, which
will give the central bank real-time market information on
interbank interest rates, may become a new benchmark for the money
market, said the People's Bank of China (PBoC).
China's current benchmark interest rate, based on the deposit
and loan interest rates of financial institutions, is a controlled
rate.
Where the previous benchmark rate system was based on buyback
and knock-down prices SHIBOR operates on the daily rate for all
loans offered by sixteen major banks.
The system is similar to London's LIBOR. It's the most widely
used benchmark for short-term interest rates in the international
money market.
The central bank said the SHIBOR will consist of eight
declaration products with maturities varying from overnight to
one-year. Sixteen commercial banks will be included in the price
declaration group.
At 11:30 AM each trading day prices of the eight declaration
products will be announced at www.shibor.org after the prices for
all products offered by all institutions have been weighted and
averaged, said the PBoC.
China's SHIBOR will provide a benchmark for pricing short-term
bonds and derivatives on the money market. It'll be a key indicator
of interest rates in the market and inject real-time market
information into the monetary control policy.
(Xinhua News Agency January 4, 2007)