The Reserve Bank of New Zealand – Te Pūtea Matua has adhered to the December 2021 Benchmark Module of the ISDA 2021
Fallbacks Protocol recently published by the International Swaps and Derivatives Association (ISDA).
Importantly, the Benchmark Module includes fallback arrangements for New Zealand’s key interest rate benchmark – the
Bank Bill Benchmark Rate (BKBM).
New fallbacks for derivatives linked to key global interbank offered rates (IBORs) have been introduced to ensure a
viable safety net is in place in the event such a rate becomes permanently unavailable.
Vanessa Rayner, Head of Financial Markets, said, “The Reserve Bank welcomes the inclusion of BKBM in ISDA’s expanded
fallback arrangements. We have worked closely with ISDA and the New Zealand Financial Markets Association (NZFMA) to
facilitate the expansion of the fallbacks.”
BKBM is the main interest rate benchmark in New Zealand and is used, for example, by market participants to calculate
the amounts payable under various financial instruments. The BKBM benchmark is set by the NZFMA each business day using
transactions or executable bids and offers.
“As the Kaitiaki (guardians) of New Zealand’s financial system, it is important to support the strengthening of our
interest rate benchmarks,” Ms Rayner said. “We also want to acknowledge the work that financial market participants have
undertaken to prepare for significant changes to global interest rate benchmarks.”
“While the primary focus of fallbacks is on derivatives instruments, it is a timely reminder for all intermediaries,
investors, and borrowers who utilise BKBM to consider whether robust documentation is in place to allow for any change
to benchmark arrangements in the future.”
The expanded set of fallbacks cover a range of benchmark rates not covered by the original ISDA 2020 IBOR Fallbacks
Protocol, which took effect on 25 January 2021. The new December 2021 Benchmark Module covers IBORs in New Zealand
(BKBM), Norway (NIBOR), India (MIFOR), the Philippines (PHIREF), Malaysia (KLIBOR), and Sweden (STIBOR).More informationISDA publishes documentation for BKBM fall-back (from the NZFMA’s New Zealand Financial Benchmark Facility)RBNZ signs ISDA’s IBOR Fallbacks ProtocolInterest rate benchmark reformNZFMA: Fallback Benchmark Consultation