Bankers not enthused by new price formula for lending rate

External benchmark could lead to extreme volatility in the interest rate process, say lenders

Bankers are not convinced that linking an external benchmark to the lending rate will lead to some great operational efficiency in how loans are priced. If assets pricing is linked to external benchmark, liabilities also have to move in tandem.  

Instead, they say an external benchmark could lead to extreme volatility in the interest rate process. Customers may or may not benefit in securing finer rates, as the risk premium will still be determined by banks. In some cases, such as home loans, there is hardly any individual risk premium, as bankers pass on the low delinquency benefit to