|By Arabian Post Staff|The Saudi Arabia Monetary Agency has written to banks instructing them not to under-report Saudi Interbank Offered Rate they’re actually lending at, Bloomberg reported.
The decision came after some banks were seen conducting business at higher rates than were quoted, indicating some submissions were below the real market, according to two of the people.
Saibor, a benchmark interest rate for riyal denominated loans, is calculated from the average of submissions from 15 banks, excluding the highest and lowest two rates. The three-month rate has risen 3.1 basis points to 2.18364 percent since SAMA sent out the three-page circular last week, its highest since Jan. 2009.
During the financial crisis, some European banks were found by regulators to have routinely lowballed submissions to the London interbank offered rate, affecting the value of trillions of dollars of loans and derivatives. To date, more than a dozen firms have paid upwards of $9 billion for their part in the scandal, which led to the dismissal of more than 100 traders.
The United Arab Emirates said last month it changed the way it estimates Eibor, the local interbank offered rate, to reflect the “true cost” of funds by adding a component on what banks need to pay to attract deposits from large clients.(With Bloomberg)