BKBM continuity and contract implications
BKBM is used as a base rate in a range of financial instruments, including derivatives such as interest rate swaps that feature in insurers’ asset and liability management strategies. With continued EU recognition, New Zealand and European firms are less likely to need to amend contracts or transition to alternative benchmarks for existing exposures that reference BKBM. “Without this decision, these financial instruments cannot legally reference the BKBM. It means the businesses and organisations would need to find an alternative EU-based benchmark for their transactions, which is not feasible,” Mason said.