The reference rate in the case of the €STR and the SOFR
- Question ID: 2020/0001
- Date of publication: 31/01/2020
- Subject matter: Loans price and other conditions
- AnaCredit Manual: Part II
- Data attribute: Reference rate
In relation to the data attribute “reference rate” under AnaCredit, please note that market participants have started to replace the EONIA with the euro short-term rate (€STR) for all products and contracts with a view to making the €STR their standard reference rate. Therefore, please clarify how banks should report the “reference rate” in cases where they use the €STR to calculate the actual interest rate vis-à-vis instruments reported to AnaCredit. In the same vein, could you also clarify how banks should report the secured overnight financing rate (SOFR), which has replaced the LIBOR and which is also used to price US dollar-denominated loans?
The euro short-term rate (€STR) and the secured overnight financing rate (SOFR) were developed after AnaCredit was introduced. As a result, the data attribute “reference rate”, which refers to the benchmark used to calculate the actual interest rate, does not include values for these benchmark rates.
Specifically, the SOFR was published for the first time in April 2018 as part of an effort to replace the USD LIBOR. Meanwhile, in 2017 the ECB decided to develop the euro short-term rate (€STR), which reflects how much banks located in the euro area must pay when borrowing money overnight from various financial counterparties without providing collateral. This new benchmark has been available since 2 October 2019. It is published on a daily basis and reflects the trading activity of the previous day. Notably, the €STR will replace the EONIA, which will cease to be published in January 2022.
Given the replacement of the above-mentioned long-standing benchmark rates, we would like to clarify the reporting of the data attribute “reference rate” under AnaCredit as follows:
- Currently no specific category exists that allows the €STR and the SOFR to be captured explicitly under the data attribute “reference rate”. Instead, the value “Other single reference rate – overnight” is reported to the ECB for all instruments in relation to which banks base the calculation of the actual interest rate on the €STR or the SOFR (or, for that matter, any other single benchmark rate for which there is no specific value under AnaCredit).
- The value “EURIBOR-Overnight” (which stands for the EONIA) is reported to the ECB for all instruments for which the actual interest rate is calculated based on the EONIA; notably, banks ensure that the data attribute “interest rate spread/margin” is reported reflecting the actual spread applied against the reference rate.
At the same time, we would also like to clarify that the AnaCredit reporting schemes will be updated so that it is possible to report to AnaCredit dedicated values for the new benchmark rates. In this regard, the first reference date as of which the €STR and SOFR benchmark rates are to be used in the secondary reporting (from national central banks (NCBs) to the ECB) is 30 September 2020. NCBs will inform reporting agents in due time regarding the specific values to use in order to allow time for the necessary preparations. In the meantime (that is, for reference dates up to and including 31 August 2020), the two benchmark rates are to be reported under the value “other single reference rate” in the secondary reporting. The changes to the instructions do not require revisions of past data to be sent to AnaCredit.
Please also note that the scheme described above is without prejudice to how NCBs may choose to receive the newly established benchmark rates in the primary reporting (i.e. from the bank to the NCB), including in relation to reporting reference dates earlier than 30 September 2020. Reporting agents are invited to contact the relevant NCB for information in this regard. However, until dedicated values are introduced, the value to be reported in the secondary reporting (i.e. from the NCB to the ECB) is “Other single reference rate - overnight”.