ECB Letter on Preparation of Banks for Interest Rate Benchmark Reforms

The letter discusses the imminent transition from the euro overnight index average (EONIA) to the new euro short-term rate (€STR) and the developments regarding the euro interbank offered rate (EURIBOR); it also covers the changes introduced for any relevant benchmark rates, in any currency, for contracts that significant institutions may be holding. ECB is committed to launching the €STR on October 02, 2019. The €STR will reflect the wholesale euro unsecured overnight borrowing costs of euro area banks. In addition, the private sector-led working group on euro risk-free rates recommended a defined transition path for EONIA. At the beginning of 2022, EONIA will be discontinued by its administrator.  In response to this letter, ECB requests the following by July 31, 2019:

• A board-approved summary of an institution's assessment of key risks related to the benchmark reform and a detailed action plan to mitigate such risks, address pricing issues, and implement process changes
• Contact points at the management level, who are in charge of overseeing the implementation of these action plans

In addition, ECB is requesting a reply, by September 15, 2019, to the questionnaire containing certain quantitative and qualitative fields to help assess the significance of benchmark reform and transition for the institution.

Related Link: ECB Letter (PDF)

Keywords: Europe, EU, Banking, Securities, EONIA, €STR, Risk-Free Rates, Interest Rate Benchmarks, EURIBOR, Benchmarks Regulation, FSB, ECB