Working group on euro risk-free rates

The working group on euro risk-free rates 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, such as EONIA and EURIBOR. This is a private sector working group; the ECB provides the secretariat and attends as an observer only.

The group recommended on 13 September 2018 that the euro short-term rate (€STR) be used as the risk-free rate for the euro area and is now focused on supporting the market with transitioning.

Why is a smooth transition to the €STR important?

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.

How should the market transition from EONIA to the €STR?

The working group recommended on 14 March 2019 that market participants gradually replace EONIA with the €STR as a reference rate for all products and contracts and make all necessary adjustments for using the €STR as their standard benchmark, including making the appropriate changes to their systems to enable a T+1 publication, i.e. taking into account that the €STR will be available by 09:00 CET based on individual transactions conducted on the previous trading day, while currently EONIA is published by 19:00  CET based on same-day transactions.

The working group also recommended that the European Money Market Institute (EMMI), EONIA’s administrator, modify the current EONIA methodology to become €STR plus a spread from the first publication date of €STR, i.e. 2 October 2019, until the end of 2021, to give market participants sufficient time to transition to the €STR.

These recommendations were made taking into account feedback received on the report on the transition from EONIA to the euro short-term rate.

EONIA to €STR legal action plan

As part of its mandate, the working group on euro risk-free rates has launched a public consultation on a legal action plan for the proposed transition from EONIA to €STR, including a set of draft recommendations which address the legal implications for new and legacy contracts referencing EONIA.

The working group recommends that new contracts referencing EONIA include robust fallback provisions and an acknowledgement that references to EONIA will be understood to be references to EONIA as modified after the change to its methodology on 2 October 2019. For legacy contracts referencing EONIA and maturing after December 2021, market participants should consider replacing EONIA as a primary rate as soon as possible or embedding robust fallback clauses referencing the recommended fallback rate for EONIA. Additionally, the working group intends to recommend €STR plus a spread as the EONIA fallback rate.

Responses to this consultation should be sent to by 17:00 CET on 12 June 2019. Please note that all responses should be made using the below response form and that feedback provided in other formats will not be processed. The ECB will summarise the feedback received and this summary will be published on the ECB’s website and considered by the working group at its meeting on 4 July 2019. 

Structure of the group

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.

Participation in the substructures of the working group

The working group is currently reorganising its subgroups to better structure its work on helping the market adopt its recommendations. Read more on the reorganisation here.

Market participants are welcome to apply to the new subgroups in order to broaden the range of views and ensure the full financial industry is represented.

Applicants should fill in the dedicated application form provided below and send it by email to 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.

Application form

Commitment to transparency

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.

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