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Analysis methodology of interbank reference rates - International trends and the results of the first Hungarian annual statistical analysis for 2014

Author

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  • Dániel Horváth
  • Eszter Makay

    (Magyar Nemzeti Bank)

Abstract

The importance of interbank rate quotations is enormous from the aspect of pricing loans, deposits, and financial instruments, and in general for the efficiency of resource allocation mechanisms in the economy. Consequently, it is crucial to ensure that interest rate quotations are defined in a transparent, authentic, and reliable way, and that they reflect true market conditions and the widest possible information base without any distortion. In recent years, following the manipulation experienced on international financial markets, the regulatory environment has been made stricter, and the mechanism of determining key interbank reference indicators has been transformed. Adjusted to international trends, the quoting practice of BUBOR has been reconsidered, and the control has been transformed. Apart from official and internal banking audits offering direct insights in the checking of interbank rate quotations, more emphasis has been laid in recent years on statistical analyses that belong to the scope of indirect analysis methods, and our article will focus on this new method of examination. The article reviews the methods used so far in international and domestic statistical examinations, and presents the Hungarian analysis framework compiled on the commission of the Quotation Committee of the Hungarian Forex Association (MFT), as well as the results of the first analysis regarding 2014. The article contributes to the international technical literature on the subject mainly by building an analytical frame based on the example of the Hungarian interbank reference rate, using various statistical approaches, which will demonstrate the key aspects of the conduct of individual panel banks and the development of the reference rate.

Suggested Citation

  • Dániel Horváth & Eszter Makay, 2015. "Analysis methodology of interbank reference rates - International trends and the results of the first Hungarian annual statistical analysis for 2014," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 14(2), pages 62-88.
    • Handle: RePEc:mnb:finrev:v:14:y:2015:i:2:p:62-88
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    References listed on IDEAS

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    Cited by:

    1. Dániel Béres, 2019. "Integrity of Financial Benchmarks," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 18(1), pages 33-59.

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    More about this item

    Keywords

    BUBOR; reference rate; LIBOR; cluster analysis; structural breaks;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

    Statistics

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