SYDNEY, Sept 8 (Reuters) - Work on overhauling Australia's main benchmark interest rate is progressing well but changes will have to be made by banks and regulators to make it work efficiently, a top central banker said on Friday.
Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle said there were enough transactions in the local bill market to calculate a robust benchmark, a major difference from the London Interbank Offered Rate (LIBOR) where a lack of deals had put its future in doubt.
Regulators have been working to refine the Australian version, known as the Bank Bill Swap Rate (BBSW), and make it less susceptible to manipulation.
Debelle said institutions in the bank bill market would need to start trading bills at outright yields rather than the current practice of agreeing to the transaction at the yet-to-be-determined BBSW rate.
"Market participants have asked us to move our open market operations to an earlier time to support liquidity in the bank bill market during the trading window, and we have agreed to do this," Debelle told a financial conference.
He also noted that the future of LIBOR was very much in doubt past 2021, and investors and banks needed to start considering what that might mean for derivative contracts they hold.
LIBOR is the benchmark for around $350 trillion of contracts globally, and Debelle estimated that Australian institutions owned around $5 trillion of contracts referencing the London rate.