JAKARTA : Indonesia’s financial regulators plan to launch new reference rates in early 2023 for the local money market for tenures longer than overnight, building on its 2018 launch of Indonia, they said in a statement on Friday.
The new reference rates will be an alternative to the existing Jakarta Interbank Offered Rates (JIBOR), but will become the benchmark once a date is set to retire JIBOR, the finance ministry, the central bank, the Financial Services Authority and the Indonesian Foreign Exchange Market Committee said in a joint statement.
Indonesia officially set Indonia as its benchmark reference rate for the overnight interbank money market in March.
Indonia was launched about four years earlier in the wake of transaction-based overnight index averages in other countries such as Britain’s Sonia and the euro zone’s Eonia.
Bank Indonesia (BI) at the time said a new reference rate was needed as banks had rarely used JIBOR due to concerns about its reliability.
BI in early 2023 will publicise Compounded Indonia for 30-day, 90-day, 180-day, and 360-day tenures, as well as Indonia Index for other tenures, which will be determined based on international best practice.
“The publication of Compounded Indonia and Indonia Index will be done in parallel with the publication of JIBOR until a date that will later be determined for the termination of JIBOR publication,” the statement said, noting this was to give market players time to transition away from JIBOR.
Money market reforms, including the use of Indonia, will create price transparency, support authorities’ efforts to deepen financial markets and support the effectiveness of monetary policy transmission, the statement said.