ECB Report on Transfer of Liquidity from EONIA Products to €STR

The report, by the private sector working group on euro risk-free rates, supplements a previous report from the working group on the impact of the transition from EONIA to the €STR on cash and derivatives products (published in August 2019) and provides clarifications on the topics that have been discussed since then. The working group highlights that contracts referenced to EONIA with maturities beyond January 03, 2022 would entail significant risks. It, therefore, recommends that market participants should replace EONIA products with €STR products and reduce their EONIA-linked legacy exposures as soon as possible.

To accelerate the transition process, market-makers are encouraged to proactively price in the €STR, rather than EONIA as their default, and central counterparties are recommended to consider developments in the nettability (compression) of the €STR and EONIA. The working group expects a full migration from EONIA-linked to €STR-linked products. It, therefore, recommends that

• the current EONIA market liquidity characteristics be used as a benchmark for building the initial target for the €STR
• market participants analyzing the available data assess the liquidity of the €STR derivatives market

Related Links

• Press Release
• Report (PDF)
• Report, August 2019 (PDF)

Keywords: Europe, EU, Banking, Securities, EONIA, €STR, Risk Free Rates, CCPs, Interest Rate Benchmarks, Derivatives, ECB