Executive Summary

Key insights and market outlook

Bank Indonesia (BI) will discontinue Jakarta Interbank Offered Rate (JIBOR) and adopt Indonesia Overnight Index Average (INDONIA) as the new benchmark rate starting January 1, 2026 ¹

²³. This move is part of the global benchmark reform following the LIBOR manipulation scandal in 2012 ¹⁴. INDONIA, based on actual overnight transactions, is considered more transparent and credible than JIBOR, which was based on quoted rates ²⁴.

Full Analysis

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Deep Dive Analysis

Bank Indonesia Transitions to INDONIA Benchmark Rate

Background and Rationale

Bank Indonesia (BI) has announced that it will discontinue the Jakarta Interbank Offered Rate (JIBOR) and adopt the Indonesia Overnight Index Average (INDONIA) as the new benchmark rate effective January 1, 2026 ¹

²³. This decision is part of a broader global effort to reform benchmark rates following the London Interbank Offered Rate (LIBOR) manipulation scandal in 2012 ¹⁴.

The transition is driven by the need for a more transparent and credible benchmark rate. JIBOR, like LIBOR, was based on quoted rates from contributing banks, which made it susceptible to manipulation ²

⁴. In contrast, INDONIA is calculated based on actual overnight transactions between banks, making it a more reliable indicator of market conditions ².

Implications for Financial Markets

The shift to INDONIA is expected to have several implications for Indonesia's financial markets. Firstly, it will enhance the credibility of the benchmark rate, potentially increasing investor confidence in the local money market ³

. Secondly, it may impact financial products and contracts that currently reference JIBOR, requiring adjustments to reflect the new benchmark ⁵.

Transition Roadmap

BI has outlined a transition roadmap for the complete phase-out of JIBOR. By the end of 2027, Compounded INDONIA will replace JIBOR for non-overnight tenors ⁵

. Furthermore, BI plans to adopt the Overnight Index Swap (OIS) rate as the new benchmark for short-term tenors by 2028, which is considered even more robust as it's based on actual transactions and is forward-looking ⁶.

References