JAKARTA Bank Indonesia (BI) together with the Ministry of Finance and the Financial Services Authority (OJK) issued guidelines for the use of IndONIA as a reference to rupiah interest rates on various financial products. This launch was carried out within the framework of the National Working Group on Benchmark Reform (NWGBR).
It was stated that IndONIA aims to increase the integrity of rupiah interest rate references in supporting the process of deepening financial markets, the effectiveness of transmitting monetary policy and financial system stability.
"This is a concrete step by NWGBR as a representative of the authority and financial market players in initiating, preparing and overseeing the process of reforming rupiah interest rate references so that the transition to interest rate reference reform as in the global benchmark reform market can run smoothly," said the BI release on Friday, September 30.
It is explained that the main focus of this guide is to explain the choice of recommendations for rupiah interest rate references based on Indonesia and its use of various financial products.
"This complaint will help all relevant business actors and stakeholders to understand the process of reforming rupiah interest rate references and become a guide in their use for various financial products," the press statement said.
It is hoped that this new provision can enrich various financial market products that use the IndONIA (IndONIA-based market) reference.
Furthermore, in line with interest rate referral reforms in the global financial market, NWGBR recommends alternative references to interest rates/alternative referral rates (ARR) for non-overnight rupiahs formed based on IndONIA and calculated according to international best practice, including IOSCO Principals, so that the robust and credible. The ARR will in time replace JIBOR.
Furthermore, to assist all relevant economic actors and stakeholders in using the recommendation of ARR rupiah, in early 2023 Bank Indonesia will publish Compounded IndONIA and IndONIA Index.
The Compounded IndONIA to be published is a reference rupiah interest rate with a tenor of 30 days, 90 days, 180 days and 360 days.
Meanwhile, for other tenors, market participants can use INDONIA Index. Publication Compounded IndONIA and IndONIA Index will be carried out in parallel with the publication of JIBOR until the date for stopping the JIBOR publication to be announced later.
It aims to provide time for economic actors and relevant stakeholders to prepare for the transition from JIBOR to INDONIA.
The use of IndONIA as a reference to the rupiah interest rate in financial market products (IndONIA-based market) will provide price transparency for economic actors so that it will encourage the process of deepening the financial market.
Prices formed from the INDONIA-based market will form a credible currency market interest rate curve so that it will support the effectiveness of the transmission of monetary policy and financial system stability.
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