The Steering Committee of the National Working Group on Benchmark Reform (NWG) announces the launch of additional round of public consultations. The process is a continuation of the public consultations conducted since 24 May 2024, as part of the process of reviewing and verifying alternative indices to WIBOR RFR (risk free rate) initiated by the decision of the NGR Steering Committee of 29 March 2024.  

As part of additional round of public consultations, the NWG Steering Committee would like to hear the views and positions of market stakeholders on the modified list of alternative indices and interest rate index proposals, which has been developed on the basis of the analyses and discussions of the NWG Steering Committee carried out so far, with particular emphasis on the positions and opinions of market participants presented in the previous round of public consultations and the results of the NWG team's work dealing with the identification of barriers and desired actions to increase the transactionality on the repo market in Poland.

The NGW Steering Committee invites all stakeholders, including financial market participants, to read the attached consultation document on the review and assessment of alternative interest rate indices and asks for responses to be sent by 31 October 2024 to: kontakt@gpwbenchmark.pl.

Link to the consultation document

When defining the list of interest rate index proposals covered by additional round of public consultations, the NWG Steering Committee was guided by a joint assessment of the quality and characteristics of the analysed alternative interest rate indices, the conditions of the national financial system and the assessment of the realistic date of achieving the desired state of development and maturity of the conditional repo market in Poland. With a view to meeting the deadline set for the end of 2027 for the conversion of benchmarks in Poland¹, the NWG Steering Committee has decided to include four indices and index proposals from the WIRF family of indices in the next round of public consultations. WIRON, WIRON+ or WRR will not be taken into account in the further course of consultations. 

In line with the expectations expressed in the previous round of public consultations², WIRF- and WIRF+/- were added to the WIRF and WIRF+ index proposals, which are modifications of the index proposals originally analysed after the exclusion of Other Financial Institutions' (PIF) deposit transactions from their information resources.  

The WIRON index was not selected for additional round of consultations, because in the course of observing the index, it was possible to notice its highest volatility in relation to other analysed indices and the resulting lowest probability of creating a liquid derivatives market.

Taking into account the opinions and positions expressed in the course of NGW's work and in the previous round of public consultations, the institutions and entities represented in the work of the NWG Steering Committee (Ministry of Finance, NBP, UKNF, BFG, GPW Benchmark, BondSpot and the banking community) declared the need for further in-depth discussion on the identified barriers to the further development of the conditional repo market in Poland and the possibility of implementing the postulates formulated in this regard. The NGW Steering Committee considers it very important to carry out further intensive activities aimed at creating a framework for further development and strengthening of the conditional repo market, enabling the use of the index for this segment of the money market in the future as an alternative interest rate indicator for PLN. It is considered desirable to increase the share of transactions concluded on the trading system and move away from sell-buy-back transactions  in favour of conditional repo transactions, as well as a gradual transfer of activity from the OTC market to the regulated market or ATS. Nevertheless, at the moment, the need to carry out too many multifaceted activities of a very diverse nature (both legal, systemic and operational) has been identified, the implementation of which, both in terms of duration and expected effects, is difficult to predict. Some respondents to the consultation clearly indicated that a growing market segment would never have been selected as the basis for a global replacement indicator. In addition, according to the FSB's "Reforming Major Interest Rate Benchmarks" document, the indicators should not be based on markets with a low level of activity. For this reason, for the time being, the proposal of the WRR index, as well as its modifications, will not be the subject of further consultations. However, as noted, work on this type of index should be carried out and ultimately, in the future, such an index could be used as an alternative index to the index that will replace the WIBOR benchmark.

In the following section, we present an additional summary of the responses received in the previous round of public consultations, which, together with other analyses available to members of the NWG Steering Committee, formed the basis for the evaluation of the indices and the choice of further course of action.

Results of the first round of public consultation on the review and assessment of alternative interest rate indices for WIBOR (previous round)

In this section, we present a synthetic summary of the responses received in the previous round of public consultations conducted by NWG, as part of the process of review and verification of alternative indices/indices to WIBOR RFR initiated by the decision of the NWG Steering Committee of 29 March 2024. 

https://www.knf.gov.pl/en/?articleId=88664&p_id=19

The positions received during the consultation do not necessarily represent the opinion of individual members of the NWG Steering Committee.

The public consultation response phase started on 24 May 2024 and ran until 1 July 2024. The consultation document, prepared with the support of GPW Benchmark S.A., was published with attachments in the NWG domain on the KNF website. The answers were sent to GPW Benchmark.

https://www.knf.gov.pl/en/?articleId=89396&p_id=19

28 responses were sent – 26 from domestic institutions and 2 from foreign institutions. The responses came from universal banks, mortgage banks, insurance companies, factoring and leasing institutions, investment fund companies and industry associations. Consumers, as well as consumer organizations, did not provide a response to the consultation.

Participation in the public consultation consisted of filling in an evaluation questionnaire. Respondents were asked to answer 15 questions, grouped into four categories: 

• Range 1 – Index Quality (5 questions)
• Range 2 – Characteristics of the index (4 questions) 
• Scope 3 – Other issues related to the index (4 questions)
• Scope 4 – Development of the money market in Poland (2 questions).

As part of the answers to the questions in Scope 1-3, it was necessary to indicate for each of the five indices or index proposals subject to the consultation (WIRON, WIRON+, WIRF, WIRF+ and WRR) to what extent it meets (or does not) the criterion to which the question referred: unclear, does not meet the criterion, poorly meets the criterion, partially meets the criterion, meets the criterion, strongly meets the criterion. In addition, to the ratings for each of the Scopes 1-3, the respondents could also post their own descriptive comment.

The last section of the questionnaire was devoted to open questions about the development of the money market in Poland. The first question concerned the conditions that will allow for the strengthening of activity on the money market in the segment of conditional repo transactions. The second question concerned the limitations in this area identified by the participants of the consultations. The answers to both questions had to be presented by their own and systemic conditions.

The following are the key observations and conclusions of the consultation:

• For all questions (except for question 1b – "data describe a broad market") a similar structure of answers is visible. The WRR index proposal received the highest score (most of the ratings "meets" or "strongly meets" a given criterion). Subsequently, the proposals for the WIRF+ and WIRF indices were indicated. The WIRON index and the WIRON+ index proposal consistently received the lowest marks.
• The proposals for the "plus" indices WIRF+ and WIRON+ had in all cases higher ratings than their base counterparts WIRF and WIRON (not including PPD 3.1.9³).
• The high ratings of the WRR were accompanied by comments related to the postulates to expand the transaction pool and to take other necessary actions related to the further development of the conditional transaction market. It should be noted that in the case of some of the responses, the high ratings for the WRR referred to the target, future shape of the money market in Poland, and not to its current state described by the analytical data contained in the consultation document.
• Among the posted comments, there was a request to  remove Other Financial Institutions from the input data sets and the resulting demand to conduct another round of public consultations, taking into account the exclusion of PIF from the data sets for WIRF and WIRF+.