what is the hong kong interbank offered rate hibor 
the hong kong interbank offered rate known by its abbreviation hibor is the benchmark interest rate stated in hong kong dollars for lending between banks within the hong kong market the hibor is a reference rate for lenders and borrowers that participate directly or indirectly in the asian economy as of december 2020 plans were in place to transition away from hibor to the hong kong overnight index average honia 1 understanding the hong kong interbank offered rate hibor the banking industry uses an interbank market for transferring funds and currency and for managing liquidity if a hong kong bank is nearing the point at which withdrawals are close to depleting short term cash reserves that bank will go into the hong kong interbank market and borrow money at the hong kong interbank offered rate hibor the terms of the loans vary from overnight to one year the u k version the london interbank offered rate libor is similar to the hibor the rate is released each day at 11 00 a m local time it is derived from the contributed quotes of 20 banks determined by the hong kong association of banks hkab the hkab acts similarly to a central bank for hong kong the highest three and the lowest three contributed values are discarded leaving the remaining 14 contributions in the calculation hibor s primary function is to serve as the benchmark reference rate in the asian markets for debt instruments this function assists government and corporate bonds mortgages and derivatives such as currency and interest rate swaps among many other financial products for example an interest rate swap involving two counterparties with good credit ratings both of which have bonds issued in hong kong dollars will likely be quoted in hibor plus a given percentage in another example a hong kong dollar denominated floating rate note frn or floater which pays coupons based on hibor plus a margin of 35 basis points 0 35 annually in this case the hibor rate used is the one year hibor plus a 35 basis point spread every year the coupon rate is reset to match the current honk kong dollar one year hibor plus the predetermined spread if for instance the one year hibor is 4 at the start of the year the bond will return 4 35 of its par value at year s end the spread usually increases or decreases depending on the creditworthiness of the institution issuing the debt criticism of hiborsince the asian currency crisis in 1997 concerns over volatility and even liquidity grew to a point where hibor s value as a benchmark is questioned even libor which is a global benchmark is under fire especially since the 2012 libor fixing scandal as of december 2020 plans were in place to phase out the libor system by 2023 and replace it with other benchmarks such as the sterling overnight index average sonia 2 sonia is based on actual bids and offers from the contributing banks and not indicated levels the latter are subject to manipulation if the contributing bank wants to hide or enhance its capital position indeed in 2013 the hibor market had its scandal when the city widened its investigation into possible manipulation of this key interest rate the hibor fixing mechanism was eventually ruled to be sound but with similar problems surfacing in other interbank markets the trend towards finding replacements is moving forward the replacement push centers on libor since it is the globally recognized standard the u s federal reserve introduced the secured overnight financing rate sofr a new reference rate created in cooperation with the u s treasury department s office of financial research 