Arab News, Saturday, Sep 18, 2021 | Safar 11, 1443
UAE central bank looking to replace benchmark rates: Reuters
Emirates:
The United Arab Emirates
central bank is studying ways to replace the local interbank rate, three sources
said, as it tries to catch up with global regulators who have called time on
such benchmarks after banks' attempts to rig them.
The UAE is looking at potential replacements for
EIBOR - the Emirates Interbank Offered Rate which is used to price financial
instruments in the Gulf’s top financial centre - and has started consultations
with commercial banks in recent weeks, said three sources familiar with the
matter.
The London Interbank Offered Rate (Libor) and
other similar "IBOR" benchmark rates are based on quotes from banks on how much
it would cost to borrow money from each other. These rates are used to calculate
interest on several types of financial transactions such as bonds and loans.
Widespread use of such rates is meant to end by
the end of this year and global regulators plan to replace them with alternative
benchmarks after a global rate-rigging scandal that began to unfold about 10
years ago.
"This is very early days, very consultative," said
one of the sources, adding that the UAE process may take more than a year.
The source was speaking on condition of anonymity
as the process to replace EIBOR has not been announced publicly.
"As the world changes, the UAE has to change as
well. Because of scandals with Libor, you want to show a comparative rate," said
the same source.
The UAE central bank, which administers EIBOR, did
not respond to requests for comment.
Libor contracts are being switched to "risk-free"
overnight rates compiled by central banks, such as Sofr from the U.S. Federal
Reserve and Sonia at the Bank of England.
The UAE consultations are taking place as the
country tries to align its financial system with international standards on
aspects such as anti-money laundering and sanctions and seeks to bolster its
status as the Middle East's commercial hub.