SONIA (Sterling Overnight Index Average) interest rate benchmark Jan 08 2020 13:58 languageMoneyScience
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The Bank of England is the administrator for SONIA (Sterling Overnight Index Average) which means they take responsibility for its governance and publication.
SONIA is based on actual transactions and reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions.
Financial businesses and institutions use SONIA in a variety of ways. For example, to calculate the interest paid on swap transactions and sterling floating rate notes. SONIA is used to value around £30 trillion of assets each year.
SONIA is the Working Group on Sterling Risk Free Reference Rates’ preferred benchmark for the transition to sterling risk-free rates from Libor.
Our Monetary Policy Committee decides what monetary policy action we take as a central bank. We implement our monetary policy by taking an active role in the financial markets using our Sterling Monetary Framework. SONIA has an important role in measuring how effective that implementation is.
SONIA was introduced in March 1997. We took responsibility for it in 2016 and, after consultation, we reformed it in 2018. The way we run SONIA complies with international best practice for financial benchmarks.