BOE to Assume Responsibility for Sonia Benchmark Rate in April

  • Central bank to provide oversight of overnight funding index
  • Move is part of reform package in response to rigging scandals

The Bank of England will take responsibility for a U.K. benchmark measure of overnight funding rates as officials seek to prevent a recurrence of the rigging scandals since the global financial crisis.

The BOE will provide oversight and governance for the Sterling Overnight Index Average, or Sonia, from April 25, it said in a statement released Wednesday. The Wholesale Market Brokers’ Association, which currently calculates and publishes the gauge, will continue to do so on behalf of the central bank.

The move is part of a package of measures to reform benchmarks and attempt to hold more individuals to account following the rigging of the benchmark Libor rate and manipulation in currency markets. The BOE announced plans in July to reform Sonia, including improving the collection of data and broadening the range of transactions underpinning it, with the benchmark moving to the new basis in the second quarter of 2017.

The BOE will issue a further consultation on its plans to reform Sonia in the late summer, it said.

Introduced in 1997, the benchmark reflects the funding rates of banks’ and building societies’ unsecured sterling overnight cash transactions valued at more than 25 million pounds ($35.6 million). Data comes from transactions brokered in London by WMBA members such as ICAP Europe Ltd. and Tullett Prebon Plc.

Sonia, which became an official regulated benchmark in April 2015, is used by participants in the wholesale funding market and as a reference rate in the Overnight Indexed Swap market.

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