Featured Product

    ECB Seeks Feedback on Publication of Compounded €STR Rates

    July 24, 2020

    ECB is consulting on the publication of compounded term rates based on the euro short-term rate (€STR). The publication would take place on a daily basis shortly after the €STR publication. Published maturities could range from one week up to one year. A daily index, making it possible to compute compounded rates over non-standard periods, is also envisaged as part of the publication. The consultation period will end on September 11, 2020 and ECB will publish an anonymized summary of the feedback received within three weeks of this deadline.

    ECB would provide benchmark users with compounded values of the euro short-term rate (€STR) for selected maturities. The publication of compounded €STR term rates is expected to encourage the adoption of robust fallback provisions by the industry. Compounded rates based on the €STR would benefit from the proven robustness, as the €STR is built on an active overnight borrowing market. This implies that, even in times of market uncertainty, the compounded €STR rate will remain robust because the overnight markets remain, by far, the most liquid. Also, in a number of major jurisdictions, such as the US and the UK, the risk-free rates are expected to take over from London Inter-bank Offered Rate (LIBOR) for a large variety of contracts, on the discontinuation of the benchmark. Accordingly, the Federal Reserve Bank of New York and BoE also committed to publishing compounded risk-free rates and/or daily indices. Hence, the publication of a compounded €STR would support international consistency. This initiative to publish the compounded term rates would be in line with the:

    • Recommendations of FSB, to encourage and support wider use of the near-risk-free rates and, hence, the €STR, by providing a “golden source” for the compounded €STR values
    • EU Benchmarks Regulation, to provide a rate that may be used in contractual fallback provisions by users of the EUR LIBOR and EURIBOR, who are required to prepare in their contingency planning for a scenario in which the EUR LIBOR and the EURIBOR may cease to exist


    Related Links

    Comment Due Date: September 11, 2020

    Keywords: Europe, EU, Banking, Securities, Target2, €STR, Benchmarks Regulation, Risk-Free Rates, Compounded Rates, EURIBOR, EUR LIBOR, LIBOR, Benchmark Reforms, ECB
    Related Articles

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582