Reference interest rate
In banking , the reference interest rate is an interest rate that is determined daily by a neutral body across all institutions for a specific currency and interest term and is recognized in the non-banking sector as a reference and benchmark .
All over the world, credit institutions differ in particular in the amount of their interest, be it loan interest or interest on investments in a certain term. There is therefore no uniform interest rate for a specific term and currency. For this reason, especially in the case of large transactions (such as the issuing of bonds or the granting of syndicated loans ) and other interest-bearing contracts, there was a need to find a uniform interest rate that would remove this atomistic lack of transparency and be regarded as representative. The reference interest rate therefore had to meet the requirements that are placed on a recognized reference value, as is often used for contracts and for legal reasons.
In insurance , especially in life insurance , the term reference interest is used differently. He used to determine the interest rate additional reserve and is a reference period of ten calendar years as the arithmetic mean of Euro - interest rate swap rates calculated ( § 5 para. 3 DeckRV ).
For a long time, the key interest rates unilaterally set by the national central banks were the only reference interest rate . That is why in England the "minimum lending rate" (called "base rate") of the Bank of England was used , in the USA the "prime rate" of the Federal Reserve Bank or in Germany the discount or later Lombard rate of the Deutsche Bundesbank . Financial transactions were linked to these key rates.
In the financial center of London, however, there was fear in banking circles that the growth of banking business would be hindered , so that from October 1984 working groups under the auspices of the British Bankers' Association (BBA), a lobby group for British banks, began working on this topic. At the same time, the German banking industry agreed in August 1985 to create the FIBOR as the DM reference interest rate.
The BBA finally developed a procedure which, from January 1986, first introduced the LIBOR for the three currencies British pound , US dollar and yen . The aim was to determine an arithmetic average interest rate in these currencies for specific terms. For this purpose, the BBA selected at least 8 and a maximum of 16 representative banks based in London ("panel banks"), which daily from 11:00 a.m. London time their internal interest rates (which do not have to be based on actual transactions) on the online Service Thomson Reuters report ("Quotierung"), which evaluates the different interest rates. The reported interest rates are interbank rates at which a bank would lend another bank money (without collateral ) on the money market at the ask rate . In the reports, 25% of the highest and lowest interest rates are eliminated before a linear average is calculated from the remaining 50%. This prevents the extreme values influencing an average value from being taken into account and falsifying the image. This average interest rate is called LIBOR and will be made available online worldwide by Thomson Reuters on behalf of the BBA from 11:45 a.m. London time.
Since then, the group of currencies participating in LIBOR has increased to 10, while the maturities range from 1 day ( overnight money ) over 1 week to 12 months.
For a long time, LIBOR was the only reference interest rate worldwide alongside the key rate. In addition to LIBOR and FIBOR, other reference or base rates were only established late. The EURIBOR has existed since January 1999 , which is now a recognized reference rate within EMU and is also used as a basis for transactions in euros outside of EMU . It is technically determined and published like LIBOR. This also applies to the EONIA , which has been published since January 1999, but which is based on actual transactions and is therefore calculated as the weighted average interest rate. EURIBOR and EONIA were planned by the ACI as alternatives to LIBOR from the start .
As a result of LIBOR, reference interest rates such as CHF-LIBOR (Switzerland), HIBOR ( Hong Kong ), SHIBOR ( Shanghai ) or TIBOR ( Tokyo ) have developed with identical determination rituals .
The ECB also publishes three interest rates that can be viewed as reference rates, namely the main refinancing rate , the marginal lending facility and the deposit facility . All other key interest rates from international central banks, such as the prime rate of the Federal Reserve Bank, can also be regarded as reference interest rates.
The basic savings rate is a reference rate for savings deposits with a notice period of three months. In the case of so-called cash deposits within the framework of rental agreements according to Section 551 (3) sentence 1 BGB, it serves as the statutory reference interest rate for the interest on the rental deposit serving as security .
For rent adjustments due to changes in the mortgage interest rate, a uniform reference interest rate has been in effect in Switzerland since September 2008. This is based on the banks' average mortgage interest rate.
Application of the reference interest rate
In the case of interest- bearing transactions with variable interest rates and interest rate adjustment clauses (particularly in the case of loan agreements or financial investments , interest rate swaps or interest rate derivatives such as interest rate caps and interest rate floors and collars , floating rate notes ), the reference interest rate is precisely defined in the contracts, including the associated interest calculation method . At the same time, a fixed surcharge (for loans) or a discount (for financial investments) is set on the reference interest rate, whereby only changes in the reference interest rate can affect the interest rate. That is why the EURIBOR is very often used for floating rate bonds, so that there is almost no risk of interest rate changes.
In Germany, the use of reference interest rates is recognized by case law , particularly in consumer protection . If variable interest rates are charged for private customers, banks may use the “cheap discretion” according to Section 315 of the German Civil Code ( BGB). However, the BGH requires that interest rate adjustment clauses in the lending business require the specification of the necessary calculation parameters. EURIBOR or LIBOR are suitable as reference interest rates. If a bank unilaterally reserves the right to change the interest rate in a form-based loan agreement, such a clause is generally to be interpreted in such a way that it only enables an adjustment (increase or decrease) of the contractual interest rate to changes in the bank's refinancing conditions due to the capital market in accordance with Section 315 BGB. Such a clause withstands judicial content control.
In the case of cash investments with variable interest rates, the market interest rate is to be used. In the case of a variable interest rate agreement, the relative difference between the initial contractual interest rate and the reference interest rate must then be maintained throughout the term of a savings plan.
The statutory base rate of Section 247 (1) BGB uses the interest rate for the most recent main refinancing operation of the European Central Bank as a reference value. A large number of legal provisions refer to it, such as Section 288 (1) and (2) BGB ( default interest ), the Bill of Exchange and Check Act , the Stock Corporation Act or the Code of Civil Procedure .
The reference interest rate is considered an important benchmark internationally , also in order to be able to better assess interest rate developments and changes. It is used as a basis for economic analyzes of interest rate developments. In addition, it is an important benchmark for all sectors of the economy that include it in planning. In very liquid money markets, the EURIBOR is a reliable benchmark for the interest rate level . With the use of reference interest rates, there are no disputes about the use of bank-specific interest rates, which are usually difficult to understand, and conflicts about the reason for interest rate changes. The agreement of a reference interest rate creates an automation of interest rate changes so that there is no longer any need to negotiate.
In addition to the key interest rates of the central banks, the arithmetically calculated reference interest rates have found even greater recognition worldwide as a representative reference and benchmark. These include LIBOR, EURIBOR and EONIA. They are now used throughout the economy as a reference interest rate for contracts with interest effect.
- ^ Friedrich L. Sell: Credit as a factor of production in agriculture . In: Theodor Dams (Ed.): Contributions to social and economic policy . Duncker & Humblot, Berlin 1990, ISBN 978-3-428-46866-9 , pp. 218 ( preview in Google Book search).
- ↑ Max Lüscher-Marty: Theory and Practice of Investments 1 . Compendio Bildungsmedien, 2010, ISBN 978-3-7155-9450-7 , 3.10 Money market investments ( preview in Google book search).
- ↑ BGH, judgment of April 13, 2010, Az .: XI ZR 197/09 = WM 2010, 933 Rn. 22nd
- ↑ Mortgage reference interest rate for tenancies ( Memento of the original from September 23, 2013 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. , Swiss Federal Housing Office from September 2013.
- ^ Joachim Prätsch, Uwe Schikorra, Eberhard Ludwig: Finance Management . Springer Berlin Heidelberg, 2007, ISBN 978-3-540-70786-8 , pp. 214 f . ( limited preview in Google Book search).
- ↑ Hartmut Bieg: Bank accounting according to HGB and IFRS . Vahlen, 2011, ISBN 978-3-8006-4456-8 , pp. 297 ( preview in Google Book search).
- ^ A b Ulrich Pape: Fundamentals of Financing and Investment . Oldenbourg Wissenschaftsverlag, 2011, ISBN 978-3-486-59842-1 , p. 178 ( limited preview in Google Book search).
- ^ BGH judgment of March 6, 1986 = BGHZ 97, 212.
- ^ BGH, judgment of June 10, 2008, Az .: XI ZR 211/07.
- ^ BGH, judgment of April 13, 2010, Az .: XI ZR 197/09