The Bank of England and the Wholesale Markets Brokers’ Association (WMBA) are today announcing that the Bank of England will become the administrator of the Sterling Overnight Index Average (SONIA) interest rate benchmark on 25 April 2016.
From 25 April the Bank will assume overall responsibility for the SONIA benchmark and will provide oversight and governance. The WMBA will continue to calculate and publish SONIA, in exactly the same way as at present, but on behalf of the Bank. The Bank will administer SONIA in line with international best practice, as encapsulated by the IOSCO Principles for Financial Benchmarks. Further details have been published today on the Bank’s website.
The Bank becoming administrator is a key step in the SONIA reform process it announced in July 2015.
The Bank views reform of SONIA as necessary, given its role as a critical benchmark in sterling markets, and in view of the limited size of the market for brokered deposits, on which SONIA is currently based. The Bank plans to broaden the range of transactions underpinning SONIA to include bilaterally negotiated, as well as brokered, transactions in order to make it more resilient.
The Bank’s new money market data collection, also announced in July 2015, will provide comprehensive coverage of sterling unsecured overnight deposit transactions and, once fully established, will be used as the data source for reformed SONIA. It is anticipated that SONIA will transition to the new basis in Q2 2017. The Bank will issue a further consultation on its plans to reform the SONIA benchmark in late summer 2016.