how is the bbsw calculated 
the bbsw is calculated and published by the australian securities exchange asx which maintains this rate the bank bill swap rate is australia s equivalent of london interbank offered rate libor and is used as a reference rate in much the same way on an institutional level for review libor is an average value of interest rates which is calculated from estimates submitted by the leading global banks on a daily basis it serves as the first step in calculating interest rates on various loans throughout the world the intercontinental exchange the authority responsible for libor will stop publishing one week and two month usd libor after dec 31 2021 all other libor will be discontinued after june 30 2023 1 for instance a variable floating rate may quote 100 basis points over libor whereas in australia they may use 100 basis points over the bbsw as stated earlier the bbsw is an average of the bank bill rates supplied by banks for various maturities according to the asx the bbsw is not as directly linked to the mortgage or other retail lending indexes as is the libor and other similar benchmarks its impact in these areas is thus minimal and limited to its general effects on interest rate levels there is a risk premium added to the bbsw to compensate for the risk of the securities as compared to the risk free rate which is typically based on government bonds for example in the u s the risk free rate is typically the u s treasury since it s backed by the u s government the credit premium added to the bbsw is typically small such as five to ten basis points however it has exceeded over 300 basis points during the financial crisis of 2008 and the months following a prime bank is one of several approved financial institutions and includes australia s four largest banks the asx reviews the members of this group annually membership requirements as listed on the asx include example of the bank bill swap rate bbsw let s say that interest rates for bank bills was 4 for the first six months of the year while rates jumped to 5 and remained at 5 for the second half of the year the average for the year would be 4 5 plus any risk premium if the risk premium was 15 basis points the bbsw would be 4 65 including the average of bank bill rates and with the risk premium added of course in reality there are more than two interest rates to average out in calculating the bbsw but it s typically considered a midpoint of all of those rates the difference between sibor and bbswthe singapore interbank offered rate known by its abbreviation sibor is the benchmark interest rate stated in singapore dollars for lending between banks within the asian market the sibor is a reference rate for lenders and borrowers that participate directly or indirectly in the asian economy the terms of the loans vary from overnight to one year notably the u k version libor is similar to the sibor while the bbsw is the australian version of libor and sibor limitations of using the bbswas with any reference rate the bbsw might not truly reflect the credit risk that exists in the market financial benchmarks did not predict the financial crisis of 2008 and the great recession that followed as a result the risk premium may not always reflect the total market risk and may act as a lagging indicator 