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Riksbank SWESTR digital money

The Riksbank’s new reference rate is called SWESTR

The Riksbank’s new transaction-based reference rate for the shortest maturity in Swedish krona has been given the name SWESTR (Swedish krona Short Term Rate). The test period for SWESTR commences on 27 January 2021. During the approximately six-month test period, SWESTR will be published as a preliminary rate on the Riksbank’s website. The Riksbank will also begin the work on designing average rates for SWESTR.

As the Riksbank has notified earlier, the test period for the new transaction-based SWESTR reference rate begins on 27 January. During the test period, a preliminary reference rate for the shortest maturity in Swedish krona will be published on the Riksbank’s website at 11.00 hours (CET) every banking day. During the test period, SWESTR shall not be used in financial contracts. The official reference rate will begin to be published after the test period has been completed.

During the test period, the Riksbank will also begin the work on designing average rates for SWESTR (SWESTR compounded averages). It is common international practice for central banks supplying a transaction-based reference rate for the shortest maturity to also publish historical averages for this rate. Central banks that do so include the Bank of England (SONIA compounded) and the Federal Reserve (SOFR averages).

The Riksbank will in future publish average rates calculated on the historical daily listings for Swedish krona Short Term Rate. These average rates will, in common with international practice, be retrospective and compounded.

The average rates for Swedish krona Short Term Rate will be an important part of the so-called fallback solution for STIBOR, which means that the average rates for SWESTR can comprise the base for an alternative interest rate to use if STIBOR were to cease during the contract period.

When designing the calculation method for average rates, the Riksbank will take into account international guidelines and practice regarding transaction-based reference rates. At the same time, the calculation method needs to be well-adapted to current conventions on the Swedish money market. During the work on designing averages for SWESTR in the spring, the Riksbank intends to gather comments and views from market participants in the Swedish financial markets.

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