Transforming Interest Rate Benchmarks - Developments in euro land

EONIA, the overnight rate for euro is being discontinued:

• From 2 October 2019 when €STR, the new risk free rate for euro becomes available, EONIA will be published as €STR plus a spread of 8.5bps. This may have implications for certain deals, and will also involve a change to the time at which the rate is made available.
• After 2021, EONIA will be phased out entirely. Deals extending beyond that deadline will need to be transitioned to an alternative rate.

What about EURIBOR? The good news is that the ECB has decided to support the continuation of EURIBOR based on a reformed methodology, but its long term future remains unclear. Contractual fallback rates in EURIBOR deals are therefore anticipated to evolve along the same lines as for legacy LIBOR deals. More imminent (Q4 2019), is a change to the basis on which EURIBOR is published – which may have contractual and operational implications for users.

Our latest briefing on 'Transforming Interest Rate Benchmarks' focusses on key developments in the euro area and some near-term action points for users of EONIA and EURIBOR.