Bank Indonesia Transitions to New Interbank Rate Benchmark

Enhancing Financial Benchmark Integrity

Bank Indonesia (BI) has announced the discontinuation of the Jakarta Interbank Offered Rate (JIBOR) effective January 1, 2026, marking a significant shift in Indonesia's financial benchmark landscape. The decision to replace JIBOR with the Indonesia Overnight Index Average (IndoNIA) represents a strategic move towards enhancing the integrity and reliability of financial benchmarks in Indonesia.

Key Differences Between JIBOR and IndoNIA

The current JIBOR system is based on indicative rates provided by contributing banks, representing their offered rates for unsecured lending in rupiah across various tenors (1 week, 1 month, 3 months, 6 months, and 12 months). In contrast, IndoNIA is a transaction-based rate that reflects the actual overnight lending rates between banks. This transition from indicative to transaction-based rates is expected to provide a more accurate and robust benchmark for financial markets.

Implementation Timeline and Market Impact

The discontinuation of JIBOR and the adoption of IndoNIA starting January 1, 2026, gives market participants a one-year transition period to adjust their systems and financial products to the new benchmark. This gradual implementation is designed to minimize market disruption while allowing for comprehensive adaptation across various financial instruments and contracts that currently reference JIBOR.

Significance for Indonesian Financial Markets

The shift to IndoNIA aligns Indonesia's financial benchmark practices with international best practices, particularly those recommended by the Financial Stability Board (FSB) following the global financial crisis. By moving to a transaction-based benchmark, Indonesia strengthens its financial infrastructure and enhances the credibility of its interbank rate, potentially leading to more efficient pricing of financial products and improved market stability.