Euro Benchmark Interest Rates Update

January 25, 2019

EU Benchmarks Regulation (BMR)

The introduction of a new Euro risk-free interest rate structure is quickly approaching its challenging deadline and professional treasurers need to take account of the timing of planned changes which in summary are:

  • The EU Benchmarks Regulation (BMR) comes into force on 1st January 2020 requiring that only benchmarks that are compliant with the new regulations can be used by EU companies in new contracts.
  • EONIA will not become BMR compliant, according to EMMI, its administrator.
  • The ECB is currently developing the Euro Short-Term Rate (ESTER), a new Euro unsecured overnight interest rate to replace EONIA as the risk-free rate in Europe.
  • Planning is underway to make Euribor compliant with EU BMR.
  • Daily publication of ESTER is planned for before October 2019.
  • An ESTER-based term structure that can be used as an alternative benchmark to EURIBOR requires a liquid derivative market is unlikely to be in place by the end of the year

For more information and developments keep an eye on: