This industry-led working group was established to identify and recommend risk-free rates that 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 put forward three risk-free rate candidates. It then sought feedback from the market via a public consultation on which of the three would be the most suitable.
Based on further discussion and the feedback received, the group announced its recommendation on 13 September 2018 that ESTER be used as the risk-free rate for the euro area.
The group is now exploring possible approaches for ensuring a smooth transition to this rate.
Careful transition planning by market participants is 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.
The working group is chaired by a private sector representative and the ECB provides the secretariat. The working group is made up of 21 credit institutions as voting members, five institutions as non-voting members and one institution as an invitee.
The group was set up by the ECB, together with the Financial Services and Markets Authority (FSMA), the European Securities and Markets Authority (ESMA) and the European Commission. These four public institutions have observer status in the group.
In addition, three subgroups on term structure, contract robustness and EONIA transition have been established by the working group.
Applicants should fill in the dedicated application form provided below and send it by email to EuroRFR@ecb.europa.eu. Applicants are expected to provide a brief overview of their motivation for applying and state their willingness to dedicate time and resources to any work streams to which they are allocated.
The working group regularly consults market participants and end users, as well as gathers feedback from other public authorities. Its terms of reference are publicly available and the group regularly reports 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.