2013-07-12
New procedure for calculating average interbank interest rates will enable reflecting more precisely the market situation
Interbank market average interest rate VILIBOR from now on will be calculated according to highly rated banks' quotes (interest rates). A larger amount of bank data will also be taken into account, which will enable reflecting more precisely the market situation. These as well as other amendments are provided by a New Procedure for Calculating and Publishing Average Interbank Interest Rates VILIBOR.
Due to recently less intensive interbank market activity, the previous calculation methodology no longer met today's requirements; as a result, it was decided to implement amendments to the calculation procedure that would reflect more precisely the average interest rate.
Calculation of VILIBOR will include the interest rates of banks whose rating is no more than two tiers below the lowest rating assigned to Lithuania. The rating requirement bar is believed to sift quotes that have deviated substantially from the market average; therefore, the lowest and the highest values will no longer be eliminated, as was the case to date. In addition, the interval for assessing interbank market turnover will be extended to 6 months. Until now, the trading performance of the last three months was taken into account.
In the selection of banks according to the quotes of which VILIBOR is to be calculated, not only interbank loan and deposit, but also repurchase, forward currency exchange and currency swap transactions between residents in litas are taken into account. The price of these transactions is also influenced by VILIBOR, thus, having included them in the selection criteria, the interbank market trends would be reflected more accurately.
The list of banks based on which VILIBOR are calculated will be revised already in the near future. Preliminary Bank of Lithuania estimates suggest that VILIBOR, after calculating them both according to the old and the new procedure, are likely to decrease.
The New Procedure for Calculating and Publishing Average Interbank Interest Rate VILIBOR should become effective from Monday, July 15th, after publishing the amendments in Valstybės žinios (Official Gazette).
VILIBOR (Vilnius Interbank Offered Rate) — average interbank interest rates that banks are willing (are ready) to offer on lending funds to other banks. Overnight, one week, two week, one month, three month, six month, and one year VILIBOR are calculated and published.