Analysis Methodology of Interbank Reference Rates − International Trends and the Results of the First Hungarian Annual Statistical Analysis for 2014

Financial Economic Review, Vol. 14. Issue 2. pp. 62-88, 2015

27 Pages Posted: 6 Apr 2016

Date Written: June 2015

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.

Keywords: BUBOR, reference rate, LIBOR, cluster analysis, structural breaks

JEL Classification: G14, G18, G21, C38

Suggested Citation

Horvath, Daniel and Makay, Eszter, Analysis Methodology of Interbank Reference Rates − International Trends and the Results of the First Hungarian Annual Statistical Analysis for 2014 (June 2015). Financial Economic Review, Vol. 14. Issue 2. pp. 62-88, 2015, Available at SSRN: https://ssrn.com/abstract=2757004

Daniel Horvath

Magyar Nemzeti Bank

Szabadsag ter 8-9
Budapest, H-1850
Hungary

Eszter Makay (Contact Author)

Magyar Nemzeti Bank ( email )

Szabadsag ter 8-9
Budapest, H-1850
Hungary

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