OSLO, Sept 20 (Reuters) - Norway’s overnight reference rate (Nowa) should be calculated based on data available to the central bank, which should scrap the current use of a panel of banks to set the rate, a working group recommended on Friday.
Nowa is normally close to the central bank’s policy rate, but often rises sharply on days when a dearth of transactions means it must be estimated by the 11 banks in the panel, the group said in a report published on the central bank’s website.
The role of banks in setting benchmark interest rates has been a hot topic in financial markets since regulators fined several banks for manipulated the London Interbank Offered Rate (Libor) earlier this decade.
The advice from the working panel is important because it would make Nowa more closely reflect Norway’s key policy rate on days when liquidity is low.
“On days where the underlying transactions are not sufficient, the calculation will probably be based on a combination of historical data and actual traded data, to the extent that actual traded data exists,” the working group said in its recommendation.
The working group consists of representatives from Norwegian banks and branches of foreign banks and is providing advice ahead of the central bank taking over as administrator of Nowa from Jan. 1, 2020. (Reporting by Victoria Klesty; Editing by Mark Potter)