On June 21, 2018, the European Central Bank published a consultation on behalf of the Working Group on
Euro Risk-Free Rates. The ECB provides the secretariat for this Working Group. The Working Group is tasked, among other things, with identifying and recommending alternatives to Euro lending benchmark rates, namely EURIBOR and EONIA.
The administrator of EONIA announced in February 2018 that, due to prolonged structural change in the underlying interbank lending market that uses EONIA as a benchmark, EONIA's compliance with the EU Benchmarks Regulation by January 2020 "cannot be warranted" and that the ongoing review of EONIA would therefore be discontinued. The consultation invites comments on three euro risk-free rates that could potentially replace EONIA. These are:
- The euro short-term rate (ESTER), a new wholesale unsecured overnight bank borrowing rate that the ECB proposes to launch before 2020;
- GC Pooling Deferred, a one-day secured, centrally cleared, general collateral repo rate, which is produced by STOXX, a wholly- owned subsidiary of Deutsche Börse Group; and
- RepoFunds Rate, a one-day secured, centrally cleared, combined general and specific collateral repo rate, which is produced by NEX Data Services Limited, a wholly-owned subsidiary of NEX Group plc, soon to be acquired by CME Group.
Market participants are also encouraged to express their views on whether it would be beneficial for the Working Group to consider assessing potential fallback rates to the Euro risk-free rate.
Comments on the consultation are invited by July 13, 2018. Respondents are asked to submit their comments using a public comments template available on the consultation webpage.
Following the consultation, the ECB will prepare an anonymized summary of the consultation feedback, which will be discussed by the Working Group and published on the ECB's website with other documents related to the meeting of the Working Group scheduled for September 13, 2018.
The consultation paper is available at: http://www.ecb.europa.eu/paym/pdf/cons/euro_risk-free_rates/consultation_details_201806.en.pdf, the public comments template is available at: http://www.ecb.europa.eu/paym/cons/html/wg_assess_cand_euro_risk-free_rates.en.html, details of the Working Group are available at: https://finreg.shearman.com/eu-authorities-appoint-industry-working-group-on- and details of the discontinuation of the EONIA review are available at: https://finreg.shearman.com/eonia-review-shelved.
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