Shanghai Interbank Offered Rate

Shanghai Interbank Offered Rate

Shanghai Interbank Offered Rate, or SHIBOR, is China’s benchmark financial instrument based on the transactions of unsecured bank loans. SHIBOR is the rate of interest on interbank loans in Shanghai, China between various banks and is one of the most important financial indices in the country.

SHIBOR is a reflection of the demand and provide of inter-bank loans in Shanghai. It is the average rate at which banks borrow funds from each other in the interbank market in China. The rate is used as a benchmark for lenders to set lending rates.

SHIBOR rates are divided into several categories, such as overnight, one-week, one-month and six-month rates, as well as specific rates for Chinese yuan, Hong Kong dollar and U.S. dollar loans. The main rate for interbank funding in Shanghai is the overnight rate, which is the rate of interest that commercial banks charge each other for lending and borrowing for one day.

The setting system for SHIBOR was first established in April 2007. Some of the main participants in the formation of SHIBOR rates include the People’s Bank of China, Chinese investment banks, commercial banks and other institutions. Each day, so-called proprietary trading desks or Quotes Committees at several participating banks submit the rate of interest they can offer or demand to lend or borrow overnight funds to other banks during the Shanghai Interbank Offered Rate Quote Submission Period. These rates are aggregated and the average is calculated and then published as the SHIBOR overnight rate.

SHIBOR rates are used as reference interest rates in China’s financial markets, particularly in the forex markets. All banks, securities and futures institutions in the country are allowed to participate in interbank lending and borrowing, and the SHIBOR rate is the rate of interest used by them to set lending and borrowing rates.

Since its launch in 2007, SHIBOR has become an increasingly important financial benchmark in China. Its importance has been further enhanced with the launch of the Shanghai Free Trade Zone in 2013, as the benchmark has become the reference rate for loans in the zone as well.

SHIBOR rates have also been used as an indicator of economic activity in the country. Changes in market liquidity can be identified by shifts in the average SHIBOR rate, and the most liquid markets in the country tend to be those with the lowest SHIBOR rate. Thus, SHIBOR reflects the current situation of the Chinese banking sector and the nation’s economy.

Shanghai Interbank Offered Rate (Shibor), is a Chinese benchmark interest rate, regulated and published by the National Interbank Funding Center, under the direction of the Peoples Bank of China. It is based on the interest rate at which banks offer to lend funds, in Chinas interbank market.

Shibor rates are available for miscellaneous tenors, ranging from overnight to one year and is published on a T+1 basis. This means that for a given period, the Shibor rate for ‘tomorrow’ is published today.

At present, seven Shibor rates are published per day, with different tenors and maturities.

Rates are usually quoted in terms of percent per year on the basis of renminbi (RMB). A six months Shibor rate will have a tenor of 6-months and a maturity of 6 months from the date it is quoted.

Shibor rates are widely used by banks in China for pricing their products and are also used by investors to provide an indication of the demand and supply of funds in Chinas money markets.

In recent years, Shibor has become increasingly important in international financial markets and is actively used as a benchmark to provide pricing for financial products in RMB. As a result, Shibor rates are now updated on an hourly basis, providing increased transparency and better liquidity to the Chinese interbank lending markets.