European Money Markets Institute

European Money Markets Institute Announces Consultation on Euro Overnight Index Average Methodology Changes

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On March 20, the European Money Markets Institute (EMMI), the administrator of the euro overnight index average (EONIA), announced a consultation on changes to the methodology for calculating EONIA. This follows the working group on euro risk-free rates’ recommendations to EMMI to take various steps to ensure a smooth transition from EONIA to euro short-term rate (€STR).

The consultation seeks feedback on:

  • Modifying the current EONIA calculation methodology for a limited period to use €STR plus a spread. The spread represents the economic difference between the underlying interests the two rates measure (that is, an interbank lending rate versus a wholesale borrowing rate). The spread will be fixed for the period EONIA is calculated using this new methodology and based on data collected over a period of at least 12 months and calculated as a 15% trimmed mean of the observations.
  • Changing the publication time of EONIA from T (7pm CET) to T+1 (11am CET).
  • Publishing EONIA using the new methodology for the first time on October 2 as this will be the first day €STR is published.
  • Discontinuing publication of EONIA on January 3, 2022, which will reflect the market on December 31, 2021.

EMMI Provides Update on EURIBOR Development

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The European Money Markets Institute (“EMMI“) has provided an update on its development of EURIBOR through a press release, available here.

EMMI previously stated that it was working on the development of a hybrid methodology for EURIBOR which will be composed of a three-level waterfall and which will leverage on market transactions whenever available, in line with regulatory regulations.

EMMI stated that it will conduct an in-depth data analysis under a number of scenarios and assess all methodological parameters. Furthermore, the three-level waterfall with allow EMMI to assess Level 1 and Level 2 submissions, whilst allowing EMMI to develop a deeper understanding of Level 3.

It was announced that following the testing stage, there will be a stakeholder consultation in the second half of 2018.

EMMI Considers EURIBOR Reforms

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On March 9, 2017, the European Money Markets Institute (“EMMI“) issued a paper that considered the legal grounds for a proposed reform to EURIBOR.

Possible reform to EURIBOR was previously outlined by the EMMI in October 2015 (available here), and the most recently issued paper delves deeper into possible evolution. In particular, the paper considers the legal ramifications of the points previously considered.

The EMMI has encouraged EURIBOR users to consider the proposed reforms in an attempt to address possible issues around any changes. The paper is available here.