, 12 tweets, 12 min read Read on Twitter
By the end of 2019, the #Eurozone Benchmark interest rates, i.e. the overnight #EONIA rate and the #EURIBOR family (with maturities from 1 week up to 12 months), will either be replaced or their calculation methodology will be radically reformed.
The benchmark rates calculation methodology is not compliant with the #EU Benchmarks Regulation (BMR), applied from Jan. 1st, 2018, which emerged in the aftermath of the #LIBOR & #EURIBOR market manipulation scandals & the #2008_financial_crisis. bis.org/publ/qtrpdf/r_… @BIS_org
On September 14th, 2018, the working group on euro risk-free rates (#WG_EuroRFR), set up by the @ECB, the @FSMA_info , @ESMAComms & the @EU_Commission, proposed the ECB’s #€STR as the replacement of #EONIA
According to the #ECB the publication of #€STR will start in Oct. 2nd, 2019.
On March 14th, 2019, the #WG_EuroRFR recommended to the #EMMI, the modification of the #EONIA methodology, so as to become #€STR plus a fixed spread from the first publication date of #€STR and to consider ceasing publication of #EONIA at the end of 2021
The #EMMI following its public consultation decided (a) that the #EONIA will become #€STR plus a fixed spread from Oct. 2 2019 onward and (b) that the #EONIA rate will be discontinued from Jan. 3rd 2022 onward.
The @ecb calculated the spread between #€STR & #EONIA at 0.085% (8.5 basis points) on the basis of the #WG_EuroRFR recommendation on the recalibration of the EONIA methodology as of 2 Oct. 2019 and until its discontinuation and its adoption by the #EMMI
On May 15th, 2019, the #WG_EuroRFR published a consultation paper on the legal action plan for the transition from #EONIA to #€STR. The various legal options for the aforementioned transition, were described along with the group’s recommendations:
New contracts: referencing #EONIA should include robust fallback provisions and an acknowledgement that references to #EONIA will be understood to be references to #EONIA as modified after the change to its methodology on 2nd, October 2019.
New contracts post October 2nd, 2019: whenever operationally feasible, market participants should consider no longer entering into new contracts referencing #EONIA, in particular new contracts maturing after December 31st, 2021.
Legacy contracts maturing after December 31st, 2021: market participants should consider replacing #EONIA as a primary rate as soon as possible or embedding robust fallback clauses with reference to the recommended fallback rate for #EONIA.
Consultation deadline for the transition from #EONIA to #€STR: July 12 2019
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