The Bank of Thailand stops publishing the THBFIX interest rate according to world markets, stops using the USD LIBOR interest, and stipulates that the bank will cease using THBFIX to make new transactions by July 1, 64 and use the fallback rate on outstanding transactions until the end of the 68th year. And accelerate the contract adjustment to use THOR interest as soon as possible
On April 8, 2021, Mr. Ronadon Numnon, Deputy Governor for Financial Institutions Stability The Bank of Thailand (BOT) revealed that, according to the London Interbank Offered Rate, the US dollar denominated (USD LIBOR) on June 30, 2023, which resulted in the BOT being discontinued. Interest rate Thai Baht Interest Rate Fixing (THBFIX) at the same time.
Therefore, in order to smooth the transition from the THBFIX interest rate, the Bank of Thailand and the Commercial Bank Readiness Working Group to cope with the termination of the use of LIBOR (Working Group) have concluded the guidelines for the transition from the rate. THBFIX interest as follows
1. Accelerate the contract adjustment from the THBFIX interest rate reference to the Thai Overnight Repurchase Rate (THOR). Financial institutions and businesses that have transactions based on the THBFIX interest rate must expedite negotiations to adjust the contract as soon as possible. And should be completed in advance of the termination of the dissemination of the THBFIX interest rate, which will effectively and sustainably mitigate the impact of changes in the value of the contract in the long term. As it is a method that can best reduce the risk to those with interest rate underlying contracts, THBFIX, it also helps to accelerate the development of the THOR market as soon as the market participants work together to adjust the contract at the same time.
2. Terminate new transactions based on THBFIX interest rates including loans, debt instruments, and derivative debentures. From July 1, 2021 onwards, to limit the volume of transactions based on the THBFIX interest rate, thus reducing the risks of financial institutions and business sectors in managing future outstanding contracts. In addition, the THBFIX interest rate derivatives market will be liquid. Descending order This is because those who have a new loan contract based on the interest rate THOR will enter into a transaction to close the risk in the derivatives market based on THOR instead.
3. Use the Fallback Rate (THBFIX) in place of the THBFIX interest rate on accrual transactions only as needed, the BOT will publish the Fallback Rate (THBFIX) interest rate, which is effective as a substitute for outstanding transactions from July 1. These interest rates can only be used by financial institutions and business sectors on existing accrual transactions. It cannot be used for any new transactions, resulting in the Fallback Rate (THBFIX) limitation on market pricing for valuation and cancellation of outstanding transactions. Therefore, it should be substituted for outstanding transactions only if necessary.
The BOT and the working group have collaborated to develop products and support the use of THOR interest rates in various types of financial transactions, such as interbank short-term borrowing. Promissory Notes, Debt Instruments, Debentures And derivatives, including the interest rate-based BOT bonds, THOR, which helped the THOR market to become more liquid in the past. Next sector To promote THOR market with sufficient liquidity to fully support the transition from THBFIX interest rate.