Template-Type: ReDIF-Article 1.0
Author-Name: Szilárd Erhart
Author-Name: Róbert Mátrai
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: erhartsz@mnb.hu
Title: The most important steps of BUBOR reforms led by the Central Bank of Hungary in
an international comparison
Abstract: What do interbank reference rates show and why do they play a prominent role? Why was
the reform of BUBOR (Budapest Interbank Offered Rate) necessary and what were the reform
steps taken by the central bank of Hungary (Magyar Nemzeti Bank – MNB) ? In this study, we
seek answers to these and similar questions, while also providing an overview of international
reform measures. The aim of the reforms initiated by the central bank was to eliminate
the main risks arising in connection to the use of LIBOR (London Interbank Offered Rate)
methodology in the domestic environment. Reference rates are considered public goods and
economic sectors have financial contracts of considerable value indexed to BUBOR; numerous
legal regulations also refer to BUBOR. One of the most important reform measure was to
establish the Quotation Committee within the Hungarian Forex Association (MFT), in order to
strengthen the independence of the administrator. The members of the Quotation Committee
include the central bank of Hungary and the delegated parties of the Hungarian Banking
Association (HBA). Important changes were made in the methodology of BUBOR in compliance
with international practice: (i) the so-called trimming procedure was adjusted to improve the
availability and reliability of price quotations;(ii) the number of listed tenors were reduced;
and (iii) the methodology of selecting BUBOR market makers was confirmed. In order to make
BUBOR quotations more transparent, the central bank of Hungary publishes quotations for
each panel bank through the REUTERS press agency and regularly prepares and publishes
statistical reviews on whether quotations comply with market conditions. In addition to this,
the minutes of the Quotation Committee meetings are public since the first session in July 2014.
Classification-JEL: E43, E52, E58
Keywords: BUBOR, reference rate, LIBOR, monetary policy
Journal: Financial and Economic Review  
Pages: 139–165
Volume: 14
Issue: 1
Year: 2015
File-URL: http://english.hitelintezetiszemle.hu/letoltes/6-erhart-matrai-en.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:14:y:2015:i:1:p:139-165