BBSW
Australia and BBSW
Bank Bill Swap Reference Rate (from: B(ank) B(ill) SW(ap)).
BBSW is the interbank reference interest rate for Australia.
It is Australia's equivalent of LIBOR or SIBOR, in that it is a reference rate that is referred to in many loan and derivative contracts, for which it will act as the base interest rate, before a margin is applied.
Given its wide usage, BBSW has been identified by the Australian Securities and Investments Commission (ASIC) as a financial benchmark of systemic importance to Australian financial markets and it is therefore important to anyone with an exposure to Australia, that there is ongoing confidence in it.
BBSW calculation
BBSW is a mid rate. It is calculated and published daily (at 10.30am Australian Eastern Time zone) and is available for the tenors of 1, 2, 3, 4, 5 & 6 months. BBSY (Bank Bill Swap bid rate) is calculated from the BBSW rate, which derives the BID and ASK rates ( +/- 5 basis points) Since 1 January 2017, the ASX has administrated and published the rates Both rates are also available on Reuters under these acronyms. Being the inter-bank rate, BBSW does contain bank credit risk.
Glossary of BBSW terms
Prime Banks are those that meet eligibility criteria set by AFMA in early 2017, these were the four main banks of Australia: NAB, Westpac, ANZ and CBA - but a greater range of banks have constituted the Prime Bank panel in the past.
Eligible Securities are Negotiable Certificates of Deposit (NCDs) and Bank Accepted Bills (BABs) of Prime Banks.
In early 2017, NCDs formed about 85% of eligible securities, with BABs forming the balance.
They are seen as a homogenous asset class that promotes market liquidity and provides the basis for effective price discovery in the market.
NCDs and BABs form a key part of the range of instruments through which banks manage their liquidity.
Approved Trading Venues - where the trade in eligible securities occurs - ICAP, Tullett Prebon and Yieldbroker, as at early 2017.
See also
- ANZ
- ASX
- Australia
- Australian Financial Regulation
- BBSW calculation methodology
- International Organization of Securities Commissions
- LIBOR
- Prime bank
- Reference rate
- SIBOR
Notes
ASIC sues NAB, ANZ and Westpac
ASIC press release - 7 June 2016
ASIC press release - 5 April 2016
ASIC press release - 4 March 2016
US class action
