Central Bank to discontinue 9- and 12-month REIBOR listings in mid-2020
Effective 1 July 2020, the Central Bank will discontinue listing 9- and 12-month interest rates in the interbank market for krónur (the REIBOR market).
The REIBOR market is a market for unsecured short-term deposits and loans between credit institutions. It operates on the basis of the Rules on Interbank Market Transactions with Icelandic Krónur, set by the Central Bank in cooperation with market participants. Although the Bank is not a participant in the REIBOR market, it lists interest rates daily and administers market transactions. Market makers in the REIBOR market are the four commercial banks.
There have been no 9- or 12-month trades in the market since 2008. Market makers negotiate credit lines among themselves and are required to submit binding quotes for deposits and loans with maturities ranging from overnight to 12 months. Beginning on 1 July, they will be required to submit quotes ranging from overnight to 6 months. Market makers will be free to continue submitting quotes for 9- and 12-month deposits and loans, however, even after the Central Bank stops listing them.
This decision, which has been taken in consultation with market markers in the REIBOR market, is in line with central bank practices in peer countries. Turnover in the REIBOR market has always been greatest at the shortest maturities, with over 90% of trading since 1998 at maturities of one week or less.
New rules on the REIBOR market are to be issued and will take effect on 1 January 2020.
Further information can be obtained from the Governor of the Central Bank of Iceland, at tel: +354 569-9600.
No. 26/2019
December 18, 2019