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Bank of England hopes to strengthen SONIA with sterling money market data collection

A consultation paper on detailed plans for a new sterling money market data collection has been published by the Bank of England. The plans were first announced in March 2015 and the consultation explains how the bank intends to use the data to reform the Sterling Overnight Index Average (SONIA) benchmark interest rate.

The purpose of the data collection is to secure and improve the information available to the Bank of England regarding conditions in sterling money markets – an important input to the decisions of the Monetary Policy Committee and Financial Policy Committee. The bank intends to collect transaction-level data from banks, building societies and major investment firms on their secured and unsecured sterling money market borrowing activity.

According to a statement from the Bank of England, this will provide the bank with a better understanding of developments in short-term interest rates, benefiting its analysis of both monetary and financial conditions. It will also provide a richer picture of activity in the sterling money market, enabling the bank to better assess overall market effectiveness.

The consultation seeks feedback from market participants and is targeted primarily at the institutions from which the Bank of England plans to collect data. According to the bank's statement, the new sterling money market data collection “will provide an opportunity to strengthen SONIA by broadening the range of transactions underpinning the benchmark”.

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