Consequences of interest rates benchmarks reform

The reform of benchmarks is carried out in developed economies from 2014 to 2021. The starting point of a large-scale reform was the scandal with the interest rate LIBOR. Instead of it, national so-called “risk-free” interest rates will appear. Although a problem of manipulating LIBOR will be resolved, new benchmarks bring new problems. They have statistical biases and will not be comparable either to LIBOR or to each other due to methodological differences. The new benchmark rates are overnight rates, and their calculation does not imply the formation of term rates. Instead of the homogeneous LIBOR family, financial markets have received a heterogeneous group of new rates. In some developing economies money markets are absent, and their central banks are faced with a problem of how to calculate the local benchmark rate under the new rules. As an alternative they are searching to use interest rates in neighboring markets.