The Bank of England has confirmed it will assume control of a key interest rate benchmark in 2018.
From 23 April the Sterling Overnight Index Average (Sonia) will be calculated and published by the Bank of England, rather than the Wholesale Market Brokers’ Association.
In April this year the BofE chose Sonia to replace the London Interbank Offered Rate (Libor) for valuing sterling-based derivatives, following a series of rate-rigging scandals involving Libor.
The BofE will introduce new methodology for calculating Sonia, which will include overnight unsecured transactions using the Bank’s Sterling Money Market Data Collection, and the publication date will move to 9am the following day.
A model benchmark of Sonia that has been running for the last six months has been 1.3 basis points below the current Sonia.
In July, FCA chief executive Andrew Bailey said Libor could be phased out by the end of 2021 and that authorities were working on several alternatives to replace it, prompting Pimco to warn of a potential “mass scramble” due to the scope of products and investors affected by Libor.