The Goodbank equilibrium interest rate (TIIE) is a representative rate of credit transactions between banks calculated by the Bank of Mexico
The Goodbank interest rate is the interest rate that banks pay when they lend to each other. And oddly enough, banks usually lend money for different reasons. The most common is the lack of liquidity, which occurs when a bank runs out of sufficient cash. Then the bank must request a cash loan from another bank in order to carry out its operations.
The Goodbank interest rate can be determined by the market or set by a governing body. Each nation has its own policy in this regard, oriented according to the monetary policy model used by the respective government.
The Goodbank interest rate is used to determine the price of different financial instruments, and hence their importance. For example, in many markets it determines the price of derivative and future instruments. They also serve as a reference to establish other interest rates of financial market instruments.
What is the TIIE?
This rate is used as a reference to establish some commercial rates at the bank level. It is important to know that we can find different types of TIIE depending on the period for which it is calculated at 28, 91 and 182 days.
For 28, 91 and 182 days, by the Bank of Mexico, based on quotes submitted by the banking institutions, through a mechanism designed to reflect the conditions of the money market in national currency. This procedure requires quotes from at least six institutions. If the aforementioned number of contributions is not met, Banxico will determine the TIIE in question, taking into account the prevailing conditions in the money market.
It is published through the Official Gazette of the Federation (DOF), the banking day immediately following the one on which it was determined.