JAKARTA - The government through the Ministry of Finance said that the transition of the global interest rate reference (benchmark) from the London Interbank Offered Rate (Libor) to a more credible reference and the strengthening of interest rate references in the domestic market had become the attention of authorities in various countries, including Indonesia.
Deputy Minister of Finance (Wamenkeu) Suahasil Nazara said the government and market players need to understand the benchmark interest rate reform agenda and prepare strategic anticipatory steps.
"The interest rate reference has an effect in the long term for the government's financing strategy (debt) for sustainable development," he said in a press statement at the G20 side event, quoted Tuesday, June 14.
According to Suahasil, changes in the interest rate reference are an important perspective in the recovery process and achieving economic stability.
"In guarding it, coordination between institutions is important for the stability of the financial sector and the real sector," he said.
The discussion raised various steps taken by global authorities to prepare interest rate reform and the Libor transition process to run smoothly.
These steps include the International Organization of Securities Commissions (IOSCO) through the issuance of the "IOSCO Principles for Financial Benchmark", while the International Swaps and Derivatives Association (ISDA) through the "ISDA 2020 IBOR Fallbacks Protocol".
"Both of these things are supported by national market players, IFEMC (Indonesian Foreign Exchange Market Committee), who said that market players have made various preparations to face the Libor transition," he explained.
Indonesia itself oversees the smooth transition of Libor by domestic market players, BI together with the Ministry of Finance, OJK and IFEMC on November 23, 2021 have formed the National Working Group on Benchmark Reform (NWGBR).
Meanwhile, the NWGBR has published a guide (white paper) on the LIBOR transition. In addition, in the process of strengthening the interest rate reference in the domestic market, the NWGBR has established IndONIA as the reference for the overnight tenor interest rate and will continue the process of strengthening the reference rate for the 1 week to 12 month tenor by referring to the selection of international reference rates.
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