B Mirror Report: Bangladesh Bank has introduced a major reform in the country’s money market by shifting from quote-based benchmarks to transaction-based reference rates, aiming to enhance transparency and improve the accuracy of interest rate formation.
Under the new system, money market interest rates will no longer rely solely on banks’ submitted offer rates, such as the Dhaka Interbank Offered Rate (DIBOR). Instead, rates will now be determined using actual market transaction data collected through an automated system.
The new benchmark rates will be published regularly on the Bangladesh Bank website from Thursday (April 15), according to an announcement made on Sunday at a press conference held at the central bank headquarters, organized by its Debt Management Department.
Officials said the reform is designed to strengthen transparency, efficiency, and dynamism in the financial market. The initiative is modelled on global standards such as the Secured Overnight Financing Rate (SOFR).
Previously, Bangladesh used DIBOR, introduced in 2010, which was based on interbank “offer rates” submitted by banks. However, inconsistent reporting by banks often resulted in a mismatch between the benchmark rate and actual market conditions.
To address these limitations, the central bank has introduced two new transaction-based reference rates:
Bangladesh Overnight Financing Rate (BOFR): A secured, risk-free rate based on interbank repo transactions.
Dhaka Overnight Money Market Rate (DOMMR): An unsecured rate based on collateral-free call money market transactions.
According to the Debt Management Department, both rates will be calculated using a volume-weighted average of actual transactions rather than individual bank preferences.
BOFR will be published for overnight and one-week tenors, while DOMMR will cover overnight, one-week, one-month, and three-month tenors.
To ensure accuracy, statistical methods will be applied to remove abnormal transactions. In cases of insufficient daily data, a rolling window approach will incorporate previous working days’ transactions to maintain consistency.
The central bank expects the new system to provide a reliable benchmark for pricing loans, bonds, and other floating-rate financial products. It is also expected to support the development of new investment instruments and improve investor confidence, particularly among foreign investors.
Officials noted that the new rates have already been tested on a trial basis since March. From April 15, 2026, the rates will be made publicly available on a daily basis, with ongoing monitoring and annual reviews planned for further improvements.
