United News of Bangladesh

In a move to modernise the financial landscape, Bangladesh Bank (BB) is set to transition into an era of transaction-based money market reference rates, moving away from offer-based indicators. The Debt Management Department of the central bank announced in a press conference on Monday that it will officially begin publishing these new rates on its website starting on Tuesday. Director General of Dept Management Department Istequemal Hussain and acting Spokesperson for the central bank Shahriar Siddiqi spoke at the press conference held at the BB headquarters. The initiative aims to enhance transparency, reliability, and efficiency within the money market segment, similar to the global Secured Overnight Financing Rate (SOFR) model.  Forex market stable, no immediate pressure for Taka devaluation: Bangladesh Bank By establishing a reliable benchmark for interest rates, the central bank expects to bring greater discipline to the financial market. Transition from DIBOR to real-time data Since 2010, the Bangladesh Foreign Exchange Dealers Association (BAFEDA) has been publishing the Dhaka Interbank Offer Rate (DIBOR).  However, because DIBOR is based on ‘offer rates’ provided by member institutions rather than actual transactions, it often fails to reflect the true market condition.  Furthermore, many banks have been inconsistent in providing this data voluntarily. To solve these limitations, Bangladesh Bank will now use its automated systems to calculate rates based on actual interbank trade data. The central bank will introduce two primary benchmark rates – Bangladesh Overnight Financing Rate (BOFR): A risk-free rate based on interbank repo (secured) transactions conducted on the Financial Market Infrastructure (FMI) platform. Dhaka Overnight Money Market Rate (DOMMR): An unsecured money market reference rate based on data from the Electronic Dealing System for Interbank Money Market (EDS Money) platform. Calculation and transparency The rates will be published in the morning of every working day on the Bangladesh Bank website. The calculation will utilise a volume-weighted mean of interest rates and transaction volumes for relevant tenors. To minimise the impact of "outlier" transactions, appropriate statistical methods will be applied to ensure the data accurately reflects market reality. For BOFR, the bank will initially publish overnight and one-week rates. For DOMMR, the tenors will include overnight, one-week, one-month, and three-month rates. If the minimum number of required transactions is not met for a specific tenor, a "rolling window" method will be used – incorporating data from previous working days until the requirement is satisfied. Impact on financial sector Central bank officials noted that this new framework will provide banks, financial institutions, and investors with a reliable indicator at the start of each day. This is expected to facilitate better risk management, valuation of financial products, and the innovation of new money market instruments. “This initiative will align Bangladesh with international standards, increasing the depth and stability of our financial market," the central bank said, adding that by providing a transparent picture of the domestic money market, the bank also hopes to attract more foreign investment.