KHALEEJ TIMES, Tuesday, Apr 17, 2018 | Shaaban 1, 1439
New Eibor system lifts rates in UAE
The UAE interbank offered rates (Eibor) rose on Sunday following the
introduction of a new way of calculating them by the Central Bank.
The new Eibor calculating method has been implemented in an attempt to make the
system more transparent and reflect market conditions more accurately.
Eibor, a reference rate calculated daily for maturities ranging from overnight
to 1 year, is published by the Central Bank, based on the averaged interest
rates at which UAE banks offer to lend unsecured funds to other banks in the
dirham wholesale money market.
On Sunday, the 1-month Eibor edged up to 1.93500 per cent from 1.92667 per cent
on Thursday, while the 1-year rate jumped to 3.03998 per cent from 2.93767 per
cent. Only the overnight rate fell, to 1.36775 per cent from 1.50500 per cent.
Banking sources explained that under the new system, the 8 banks in the
rate-setting panel - down from 10 banks in the old system - will have to provide
written justifications for each of their submissions.
Under the old method, banks did not need to provide such justifications. The new
system is designed to make quotes more transparent and ensure that banks use the
same criteria for their quotes, sources explained.
Sources said the new system encourages banks to consider a wider range of trades
and counterparties when submitting quotes, rather than just basing their quotes
on trades with long-term bank clients to which they may lend relatively cheaply.
Bankers said the new system, therefore, could push up interbank offered rates,
though the impact is likely to be small because some banks had already expanded
their reference points for quotes in the weeks before the system came into
As per the new system, the highest and lowest quotes submitted by banks in the
new panel will be discarded before Eibor rates are calculated by averaging the
The central bank said from April 15, 2018, it would not be acting as the
calculating agent of Eibor and this role has been assigned to Thomson Reuters
"We will continue to publish the past historical data from October, 2009, as
well as the daily Eibor fixings published from the date of application of these
regulations. Bank-wise details for each daily fixing will be provided on this
website, consolidated month wise for each quarter," the central bank statement
posted on its website said.