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    EC Publishes Rules on Replacement Rates for EONIA and CHF LIBOR

    October 22, 2021

    The European Commission (EC) published two Delegated Regulations in the Official Journal of the European Union, nominating the replacement rates for two interest rate benchmarks: the Swiss Franc London Interbank Offered Rate (CHF LIBOR) and the Euro Overnight Index Average (EONIA). The Regulations shall take effect from November 11, 2021. As of January 01, 2022, all references to CHF LIBOR and EONIA in contracts and financial instruments will automatically be replaced with references to new risk-free rates, as communicated by EC in its news release.

    The two reference rates—CHF LIBOR and EONIA—will cease being published at the end of this year. For CHF LIBOR, the nominated replacement rate is the new Swiss Franc risk-free rate SARON. EONIA references will be replaced by references to the euro risk-free rate €STR. In both cases, an adjustment spread is applied so that undue value transfer is limited. These designations follow public consultations on the issue and are in the interest of all European Union citizens and companies who are party to such contracts. The statutory replacement will be automatic as of January 01, 2022 and contracts can continue without the need for intervention from contract parties. However, parties can still choose to renegotiate contracts bilaterally. Where parties choose to do so, the statutory replacement does not apply. The European Commission encourages national authorities to engage with consumers, investors, and businesses to further explain the implications of such replacements.


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    Keywords: Europe, EU, Banking, Securities, EONIA, CHF LIBOR, Interest Rate Benchmarks, SARON, €STR, Benchmark Reforms, EC

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