POLONIA


POLONIA index  was created at the initiative of ACI POLSKA which along with NBP worked out a mechanism of setting out a reference rate the purpose of which was reflecting the fluctuations of O/N deposits’ prices in the interbank market. The same applies to EONIA rate.

The origination of this index is strictly correlated with the OIS market development in Poland. OIS are specific IRS transactions where the role of the floating rate is played by WIBOR overnight (O/N) or the very Polonia rate.

The first experiences with WIBOR rate used for OIS transactions were not good. WIBOR O/N rate and all other reference rates show the situation in the market at 11 am. Much as in the case of longer terms it is sufficient, in the case of O/N transactions such a rate is not a good measure of what has been going on in the market over the day. As a rule, O/N rates are very volatile and one quotation at 11 am is not enough to reflect the market trend.

POLONIA is thus calculated as an average weighted of the rates and amounts of transactions provided by the market players. On the day of fixing, by 4:30 p.m, each participant is obliged to provide NBP with a list of transactions concluded and sent for settlement on a given day by 4 pm for the O/N term. The rate calculated this way is published in the NBP information service at 5 pm. The rules and regulations for the POLONIA fixing reference rate specify in detail the obligations of bank-participants and the fashion of providing data to NBP.

At the moment, POLONIA rate describes, on average, 57% of the concluded inter-bank transactions. Thus, the index includes daily O/N transactions of PLN 3,5bn on average. The other transactions concluded between the entities which are not fixing participants are not included in fixing. The full list of fixing participants can be found on ACI Polska’s web sites.

POLONIA rate is mainly used for settling OIS contracts though it is also applied with an increasing frequency in banks as a benchmark for defining the cost of funding.