UAE central bank to publish new DONIA reference rate
15 November 2021 UAE
Image: AdobeStock/ vkilikov
The Central Bank of the UAE (CBUAE) will release a new index for AED-denominated overnight funding transactions from 7 December.
The Dirham Overnight Index Average, or DONIA, is the effective overnight reference rate for the Dirham.
It is calculated as the volume-weighted money market rate for all actual overnight secured and unsecured funding transactions sized AED 10 million or larger, contracted by all banks operating in the UAE and processed through the UAE Funds Transfer System (UAEFTS).
This new reference rate, which forms part of the new Dirham Monetary Framework implementation plan, aims to provide market participants with data relevant to the overall state of the actual interbank market and to promote transparency in domestic money market activities.
The central bank anticipates that this index will provide an anchor for banks in determining factors relevant to daily fixing of interbank rates (EIBOR).
It proposes that EIBOR and DONIA will co-exist in the domestic markets and it has no plans to decommission EIBOR when DONIA becomes active. At this stage, DONIA will not be used to price financial market products offered or structured in the UAE.
DONIA will be published at 9:30 local time on official working days in the UAE on the CBUAE website and via Bloomberg and Refinitiv Eikon.
CBAUE governor H.E. Khaled Mohamed Balama says: “The launch of DONIA facilitates implementation of the new Dirham Monetary Framework. We, at the CBUAE, are confident that the publication of this new reference rate will not only provide additional transparency to the Dirham money markets, but also help the CBUAE in ensuring overnight money market rates are aligned to the prevailing base rate.”
The Dirham Overnight Index Average, or DONIA, is the effective overnight reference rate for the Dirham.
It is calculated as the volume-weighted money market rate for all actual overnight secured and unsecured funding transactions sized AED 10 million or larger, contracted by all banks operating in the UAE and processed through the UAE Funds Transfer System (UAEFTS).
This new reference rate, which forms part of the new Dirham Monetary Framework implementation plan, aims to provide market participants with data relevant to the overall state of the actual interbank market and to promote transparency in domestic money market activities.
The central bank anticipates that this index will provide an anchor for banks in determining factors relevant to daily fixing of interbank rates (EIBOR).
It proposes that EIBOR and DONIA will co-exist in the domestic markets and it has no plans to decommission EIBOR when DONIA becomes active. At this stage, DONIA will not be used to price financial market products offered or structured in the UAE.
DONIA will be published at 9:30 local time on official working days in the UAE on the CBUAE website and via Bloomberg and Refinitiv Eikon.
CBAUE governor H.E. Khaled Mohamed Balama says: “The launch of DONIA facilitates implementation of the new Dirham Monetary Framework. We, at the CBUAE, are confident that the publication of this new reference rate will not only provide additional transparency to the Dirham money markets, but also help the CBUAE in ensuring overnight money market rates are aligned to the prevailing base rate.”
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