KIBOR Presentation
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KIBOR (Karachi Interbank Offered Rate
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Transcript of KIBOR Presentation
KIBOR (Karachi Interbank
Offered Rate
Definition
KIBOR stands for Karachi Inter Bank Offered Rate.
It’s the rate of interest at which banks offer to lend money to one another.
KIBOR, is the average interest rate at which term deposits are offered between prime banks in the Pakistani wholesale money market or interbank market.
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Background
Initially, introduced in September 2001, KIBOR was only used as a reference rate for interbank money market (for clean lending) to promote the culture of floating rate lending and make the mechanism transparent both for lender as well as borrower
It was also introduced to establish a benchmark interest rate.
Background
Initially KIBOR of one-month; three-month and six-month tenors was used as bench mark for all-corporate lending in the local currency.
Subsequently, It was successfully extended to one year on March 31, 2004 and would be extended to three years by December 31, 2004
Now KIBOR Rates are quoted for 1W, 2W, 1M, 3M, 6M, 9M, 1Y, 2Y and 3Y tenors
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KIBOR as a benchmark
To encourage transparencyPromote consistency in market based pricingImprove management of the market risk
undertaken by banks.
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How it is derived
KIBOR is the average rate (offer side), for the relevant tenor, quoted/published on Reuters by 20 commercial banks or as published by the Financial Markets Association of Pakistan in case the Reuters page is unavailable.
Updated at 11.30 AM daily on Reuters by excluding Out-layers, 4 extremes on higher and 4 extremes on lower side.
How it is derived
Authenticity is confirmed by making the contributors liable to accept Bid/Offer within 15 minutes from the time of update up to Rs 100 million of Lot Size by Contributor Banks.
FMA ensures timely and error-free availability of the rates.
Financial Markets Association of Pakistan (FMA)
It was formed in 1997, It is a Non-commercial, Non-profit, Self-
financed and Professional Association of Dealers of Financial Instruments.
Select the members of the KIBOR ClubUpdate KIBOR on ReutersConfirm the authenticity
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Reuters
UK based News agencyProvides information around the world.KIBOR flashed on Reuters on September
7,2001Reuters has helped our market come a long
wayPrimary and Secondary rates maintained by
SBP but KIBOR only disseminated on Reuters network
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Application
With effect from 31st January 2004 Karachi Interbank Offered Rate (KIBOR) is used as the benchmark for all corporate lending like:
Term Finance Certificates (TFC’s)Commercial Papers (CP’s)Over Drafts and Running Finance
Banks are required to use KIBOR as a bench mark for determining pricing of their loans.
These are clean rates on which banks borrow and lend without security.
Application
The banks do lending and borrowing taking KIBOR as benchmark with additional margin on it, which depends on
The tenure of the deal The liquidity level The credit quality
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KIBOR will not be applicable on
Export Finance Scheme (EFS)
Small Medium Enterprise Lending's (SME)
OD’s and Running Finance prior to January 31,
2004
TFC’s and CP’s prior to January 31, 2004
All time loans sanctioned before January 31,
2004
Streamlining of KIBOR by SBP
Below steps are followed to streamline KIBOR:Banks which fail to submit KIBOR rates would
be suspendedSBP will investigate complaints by KIBOR
contributor banks.SBP will monitor the quotes among the KIBOR
contributor banks
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Factors linked with KIBOR
Interest rateRate of InflationPurchase PowerDiscount RateBalance of Payments
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KIBOR Trend
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2011 2010 2009 2008 2007 2006 20050.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
12.13
13.30
12.50
14.77
10.78 10.15
8.39
1-Week
2011 2010 2009 2008 2007 2006 20050.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
12.14 13.32
12.43
14.52
10.22 9.75
8.20
2 - Week
2011 2010 2009 2008 2007 2006 20050.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
12.14 13.37
12.46
14.67
10.04 9.98
8.42
1 - Month
2011 2010 2009 2008 2007 2006 20050.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
11.98
13.46 12.35
15.52
9.92 10.42
8.76
3 - Month
2011 2010 2009 2008 2007 2006 20050.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
12.02
13.62 12.43
15.70
10.00 10.65
9.05
6 - Month
2011 2010 2009 2008 2007 2006 20050.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
12.34
14.12 12.80
16.11
10.43 11.00
9.58
1 - Year
2011 2010 2009 2008 2007 2006 20050.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
12.41
14.23 12.94
16.19
10.66 11.25
9.92
2 - Year
2011 2010 2009 2008 2007 2006 20050.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
12.46
14.34 13.03
16.29
10.84 11.42
10.18
3- Year
Thank you
Any Question?
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