Working group on euro risk-free rates
The ECB is setting up a working group, together with the Financial Services and Markets Authority (FSMA), the European Securities and Markets Authority (ESMA) and the European Commission, which will be tasked with, among other things, identifying and recommending alternative risk-free rates. Such rates could serve as a basis for an alternative to current benchmarks used in a variety of financial instruments and contracts in the euro area.
The group will then explore possible approaches for ensuring a smooth transition to these rates, if needed in the future.
In such a case, careful transition planning by market participants will be needed to minimise disruption to markets and consumers and to safeguard the continuity of contracts to the greatest extent possible, including contracts that currently reference a term rate rather than an overnight rate. These tasks require the involvement of public authorities and a concerted effort by all market participants to facilitate a gradual reduction in the current reliance on interbank offered rates.
Structure of the group and commitment to transparency
The working group will be chaired by a private sector representative and the ECB will provide the secretariat.
The working group will regularly consult market participants and end users, as well as gather feedback from other public authorities. Its terms of reference are publicly available and the group will regularly report on its meetings. This is to ensure transparency throughout the entire process of identifying and adopting new risk-free rates.
Ensuring broad market acceptance is vital for the effective functioning of any alternative to existing benchmark rates.
Call for expressions of interest in participating in the working group
The ECB, FSMA, ESMA and the European Commission are calling for expressions of interest in participating in the working group.
This call is primarily aimed at credit institutions, which will constitute the voting members of the working group and are expected to take the lead in the reform process. Other, non-banking institutions or associations are also welcome as of now to flag their interest in contributing to the activities of the working group and its future substructures.
For more details about participating, and on how to apply, see the Call for expressions of interest.