Overview of the euro short-term rate (€STR)
The euro short-term rate (€STR) reflects the wholesale euro unsecured overnight borrowing costs of banks located in the euro area. The €STR is published on each TARGET2 business day based on transactions conducted and settled on the previous TARGET2 business day (the reporting date “T”) with a maturity date of T+1 which are deemed to have been executed at arm’s length and thus reflect market rates in an unbiased way.
The €STR control framework – where relevant and appropriate – implements the international best practices set out in the Principles for Financial Benchmarks of the International Organisation of Securities Commissions (IOSCO). The €STR statement of compliance provides an overview of how the ECB administers the €STR and a self-assessment of how the governance, quality and accountability processes that have been put in place for the €STR comply with each IOSCO principle. The statement has been confirmed by an external audit company in an independent assurance report.
The International Securities Identification Number (ISIN) assigned to the €STR is EU000A2X2A25. The Financial Instrument Short Name (FISN) is ECB/EUR EURO SHORT-TERM RATE IR.
How is the €STR published?
The ECB publishes the €STR at 08:00 CET on each TARGET2 business day. For example, the €STR published on 2 October 2019 – the start date – reflected trading activity on 1 October 2019.
The €STR is published on the ECB’s website, via the ECB’s Market Information Dissemination (MID) platform and in the ECB’s Statistical Data Warehouse (SDW). The MID platform is the main publication channel for the €STR.
Additional information on the MID platform can be found in the MID Catalogue of services and integration guide.
If errors are detected following the first publication of the €STR that affect the rate by more than 2 basis points, the ECB will revise and re-publish the €STR once on the same day at 09:00 CET. No changes will be made to the €STR after that time.
Summary information on errors larger than 0.1 basis points that are detected after the standard publication and do not meet the republication criteria can be found on the €STR Transparency on errors page. This information on errors is updated on a quarterly basis.
If, exceptionally, the ECB does not publish the €STR by 09:00 CET, the rate of the previous TARGET2 business day applies (modified as described in the €STR methodology and policies if a change in policy rates occurred on that day).
How is the €STR calculated
The €STR is based entirely on daily confidential statistical information relating to money market transactions collected in compliance with the Money Market Statistical Reporting (MMSR) Regulation.
The list of MMSR reporting agents is provided on the MMSR webpage. There are four national central banks assisting the ECB in the collection of the input statistical information: the Deutsche Bundesbank, the Banco de España, the Banque de France, and the Banca d’Italia.
The method of calculation is defined in the €STR methodology and policies. The ECB reviews the €STR methodology and publishes a report every year.
As with any benchmark, there may be limitations arising from circumstances beyond the administrator's control.
A contingency procedure has therefore been established to address, among other potential limitations, cases where (i) there is a lack of data; (ii) there is a possible concentration of inputs; or (iii) systems break down, preventing a sufficient data feed and thereby hindering the calculation of a representative transaction-based rate. The contingency procedure is triggered if the number of reporting banks is less than 20, or if five banks account for 75% or more of the total volume of transactions. The contingency computation methodology that is applied in this case is set out in the €STR methodology and policies.
In line with the ECB’s policies and the €STR Guideline, stakeholders will be consulted in the event of material changes to the €STR methodology and policies, such as changes in the scope of eligible transactions, the calculation formula, or the contingency arrangements, which mean that the index performance or published values would be affected.
A public consultation, to the extent it is possible or practicable, would then be announced on the €STR website. Consultations are open for responses for a period of at least six weeks. Proposed changes and consultation responses are scrutinised by the Oversight Committee, and a summary of the comments received and the ECB’s responses is published on the €STR website along with the final result.
How is the €STR governed?
The €STR is governed by the €STR Guideline. The Guideline establishes the ECB’s responsibility for the administration and oversight of the €STR and the tasks and responsibilities of the ECB and Eurosystem national central banks with respect to their contribution to the €STR determination process and related procedures.
The Guideline also establishes a control framework to protect the integrity and independence of the determination process and to deal with any existing or potential conflicts of interest identified. This control framework also refers to the ECB’s and the Eurosystem’s common corporate ethical culture as embedded in the ECB Ethics framework (which applies to all ECB staff), the ethical standards for all central banks of the Eurosystem (Eurosystem Guideline), established by the Governing Council, and the Code of Conduct for high-level ECB officials.
All these instruments establish ethical principles, rules and procedures for the identification, reporting, disclosure, management, mitigation and avoidance of conflicts of interest in relation to all Eurosystem tasks, including all tasks related to the €STR. Further details on how the framework is implemented at the ECB are provided on the Ethics – working with integrity webpage.
The €STR Guideline further establishes a €STR Oversight Committee. The €STR Oversight Committee reviews, challenges and reports on all aspects of the €STR determination process as established by the €STR Guideline.
The ECB policy and procedure for the cessation of the euro short-term rate (€STR) provides the policies and procedures that would be followed in the event of a cessation of the €STR owing to any situation or circumstance which would make it no longer representative of the underlying interest. The ECB reminds the users of the €STR that they are responsible for establishing their own fall-back provisions in the event of material changes to, or a cessation of, the €STR.
How is the new EONIA calculated?
Following a recommendation made by the Working group on euro risk-free rates on 14 March 2019, as of 2 October for the trade date 1 October 2019 the European Money Market Institute (EMMI) changed the way it calculates the EONIA. The EONIA methodology has been redefined as the €STR plus a fixed spread, calculated using the methodology adopted by the EMMI as the difference between the underlying interest rate of the EONIA and the pre-€STR using daily data from 17 April 2018 to 16 April 2019. The ECB has calculated this spread as 0.085% (8.5 basis points).
How did the transition from the EONIA to the €STR and the new EONIA take place?
The Working group on euro risk-free rates has provided market participants with details on how to transition from the EONIA to the €STR. The EONIA was published by 19:00 CET based on same-day transactions until 30 September 2019. On 1 October there was no publication of the EONIA or the €STR. On 2 October 2019 the €STR was published for the first time. It is published at 08:00 CET (and potentially republished at 09:00 CET) on each TARGET2 business day, reflecting the trading activity of the previous day. The new EONIA, which was also published for the first time on 2 October 2019, is published at 09:15 CET and is based on the €STR.
How will the EONIA and the €STR be used in future?
The Working group on euro risk-free rates recommends that market participants gradually replace the EONIA with the €STR for all products and contracts, making the €STR their standard reference rate.
What is the pre-€STR?
The pre-€STR was released for data up to 30 September 2019. The releases also included charts illustrating key features of the pre-€STR rate.
While the €STR and the pre-€STR follow the same calculation methodology, the pre-€STR was based on final data and included all revisions in terms of cancellations, corrections and amendments submitted by reporting agents by the time the rate is calculated. By contrast, the €STR is published each morning at 08:00 CET, taking into account only the statistical information received by the submission deadline of 07:00 CET that morning, subject to the quality processing steps described in the €STR methodology and policies.
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The pre-€STR is only a set of indicators for the €STR. Its publication is for information purposes only and the data are not intended for use as a benchmark or reference rate in any market transaction, whether directly or indirectly.
€STR complaints procedure
Pursuant to Article 11 of the €STR Guideline, any person may submit to the ECB a written complaint about any aspect of the €STR determination process that they reasonably consider has significantly affected their interests.
Complaints may be submitted by post or by e-mail to €STR Complaints, European Central Bank, 60640 Frankfurt am Main, Germany. For questions about the €STR, please refer to the €STR questions and answers or contact us using the online form.