Shanghai Interbank Offered Rate (SHIBOR)

Shanghai Interbank Offered Rate (SHIBOR) The Shanghai Interbank Offered Rate (SHIBOR) is a benchmark interest rate used in the People's Republic of China to reflect unsecured lending costs in the Shanghai interbank market, and it serves as a reference for People's Bank of China, China Banking and Insurance Regulatory Commission, National Association of Financial Market Institutional Investors, Bank of China, Industrial and Commercial Bank of China lending and derivative contracts. Launched in 2007 amid reforms influenced by Global Financial Crisis of 2007–2008, World Bank, International Monetary Fund, Asian Development Bank and China International Capital Corporation analyses, SHIBOR links money market pricing with policy signals from State Council (China), Ministry of Finance (China), China Securities Regulatory Commission, Shanghai Stock Exchange and China Foreign Exchange Trade System.

Overview

SHIBOR functions as a daily set of reference rates derived from submissions by major Chinese banks including People's Construction Bank of China, Agricultural Bank of China, China Merchants Bank, Bank of Communications, HSBC (Hong Kong) branches, and foreign banks operating through Shanghai Free-Trade Zone, with governance supported by the National Interbank Funding Center (NIFC), Shanghai Clearing House, China Foreign Exchange Trade System (CFETS), China Investment Corporation and oversight by regulators such as People's Bank of China and China Banking and Insurance Regulatory Commission. The mechanism was modeled in part on international benchmarks like London Interbank Offered Rate, Euro Interbank Offered Rate, Tokyo Interbank Offered Rate and considerations from Basel Committee on Banking Supervision, Financial Stability Board, International Organization of Securities Commissions and Bank for International Settlements. SHIBOR influences pricing in instruments including interbank lending, repurchase agreement, commercial paper, corporate bond, interest rate swap, mortgage loan and policy financial bond markets traded on venues like China Interbank Bond Market and Shanghai Stock Exchange.

Calculation and Tenors

SHIBOR produces multiple tenors — overnight, 1 week, 2 weeks, 1 month, 3 months, 6 months and 1 year — with submissions aggregated using a trimmed mean after excluding outliers from a panel of banks such as Agricultural Bank of China, Industrial Bank Co., Ping An Bank, China CITIC Bank and foreign participants like Standard Chartered Bank, Deutsche Bank, Citibank. The calculation method draws on practices debated at forums including International Swaps and Derivatives Association, European Securities and Markets Authority, Financial Conduct Authority, Committee on Payments and Market Infrastructures and recommendations from Bank for International Settlements, while daily publication aligns with disclosure customs seen at Hong Kong Monetary Authority and Federal Reserve System. Tenor-specific dynamics interact with instruments such as repos, central bank bills, policy rate transmissions by People's Bank of China and liquidity operations in Shanghai Interbank Market.

Governance and Administration

Administration of SHIBOR is managed by the National Interbank Funding Center under the guidance of People's Bank of China and coordination with the Shanghai Clearing House, China Foreign Exchange Trade System, China Securities Regulatory Commission and China Banking and Insurance Regulatory Commission, with procedural oversight influenced by international bodies like Financial Stability Board and Basel Committee on Banking Supervision. The panel composition, submission rules and publication protocol are set out in frameworks similar to those adopted by ICE Benchmark Administration for LIBOR, and reforms have referenced reports by International Monetary Fund, Asian Development Bank and consulting firms including McKinsey & Company and Boston Consulting Group examined by committees including the State Council Financial Stability and Development Committee. Operational aspects involve settlement agents such as China Clearing and interbank messaging consistent with standards promoted by Society for Worldwide Interbank Financial Telecommunication.

Market Impact and Uses

SHIBOR serves as a benchmark for pricing corporate loans by banks like Bank of China and China Construction Bank, benchmarking interest rate swaps traded via dealers including Goldman Sachs (Asia) and UBS, and anchoring yields on Chinese government bond-linked derivatives, municipal bond issuance, commercial paper, asset-backed securities, renminbi-denominated instruments in onshore financial markets and funding costs for institutions participating in China Interbank Bond Market and Shanghai Stock Exchange Science and Technology Innovation Board. Market participants — including sovereign wealth funds like China Investment Corporation, pension funds and asset managers such as China Asset Management Co. — use SHIBOR in collateralized transactions, valuation models, and risk management frameworks influenced by research from People's Bank of China think tanks, China Academy of Social Sciences and academics affiliated with Tsinghua University and Peking University.

Criticisms and Reforms

Critiques of SHIBOR echo international concerns raised over LIBOR scandal and EURIBOR manipulation, focusing on panel incentives, transparency, and susceptibility to strategic reporting by participant banks including allegations involving large state-owned banks like Industrial and Commercial Bank of China or major policy-driven distortions tied to interventions by People's Bank of China. Reforms have included tightening submission rules, increasing panel diversity with participation from foreign banks like HSBC (China), enhancing oversight by National Interbank Funding Center and adopting best practices from International Organization of Securities Commissions, Financial Stability Board recommendations, and technology upgrades inspired by distributed ledger technology pilots in Shanghai and Shenzhen to improve auditability. Ongoing debates involve alternative benchmarks such as market-based risk-free rates promoted by Bank for International Settlements and operational changes influenced by research from International Monetary Fund and policy directives from the State Council (China).

Category:Interest rates