Ahead Of The Termination Of JIBOR, BI Prepares A Fallback Rate

JAKARTA - Bank Indonesia (BI) in collaboration with The International Swaps and Derivatives Association (ISDA) and Briomberg Index Service Limited (Bloomberg) ensure that the reference for the standard meets the standards in the global financial market.

This is done in line with the plan to implement the termination of the publication of the Jakarta Interbank Offered Rate (JIBOR) which is effective from January 1, 2026.

"The Fallback rateJIBOR is calculated using CompoundedINDONIA plus a spread adjustment. Meanwhile, the calculation of the spread adjustment is carried out using the ISDA methodology," said BI Communications Department Executive Director Ramdan Denny Prakoso quoting Antara.

The Fallback Rate is an interest rate set to be used in a financial contract if the previous interest rate reference (JIBOR) is no longer published.

ISDA has chosen Bloomberg as a vendor who calculates and publishes thefallback rate including spread adjustments, using the calculation method developed after consulting with global financial market players.

Ramdan said the use of the fallback rate as a substitute reference interest rate was addressed, especially for contracts that would mature after JIBOR was no longer published.

The indicative figures for each tenor adjustment based on calculations as of September 27, 2024, which can be used as a reference, are 1 week tenor of 0.56886 percent, 1 month 0.75934 percent, 3 months 0.95228 percent, 6 months 1,09856 percent, and 12 months 1,31837 percent.

Furthermore, publication of the adapt definitive andall-in fallback rate, historical paperback rateJIBOR as well as information on the use of the phoneback rate, can be accessed on the Briomberg website in the near future.

The spread adjustment based on the ISDA IBOR Fallback method was carried out by calculating the median from the difference between JIBOR and the Adjusted Reference Rate INDONEIA compounded-in-ears for each major tenor.

The calculation uses historical data over the past five years from the JIBOR target trigger date as of September 27, 2024.

The National Working Group on Benchmark Reform (NWGBR) has issued a Jakarta Interbank Offered Rate (JIBOR) Update Guideline as a follow-up to Bank Indonesia's decision to stop publication of JIBOR since January 1, 2026.

NWGBR, which consists of the Ministry of Finance, Bank Indonesia, the Financial Services Authority and the Association of Indonesian Money Market and Valas Market Players (APUVINDO), has a function to provide information for market participants regarding the benchmark reform agenda and recommendations for reference interest rates in the domestic financial market.

This guide is expected to support the smooth transition process of JIBOR, and help business actors and all stakeholders understand the process of reforming the rupiah interest rate from JIBOR to INDONESIA.