The European Central Bank has published a report by the working group on euro risk-free rates providing high-level recommendations for fall-back provisions in contracts for cash products and derivatives transactions referencing EURIBOR. The recommendations are not legally binding and market participants can decide whether, and to the extent to which, they wish to adopt them. EURIBOR were identified as critical benchmarks for the purposes of the EU Benchmarks Regulation and the methodology for calculating EURIBOR has been revised to be Benchmark Regulation-compliant, to be implemented by the end of 2019.
The working group published Guiding Principles for fallback provisions in cash products in January 2019. This latest set of recommendations builds on those Guiding Principles and takes into account the developments since January. The paper confirms that EURIBOR is not due to be discontinued, as is the case for EONIA, which will be replaced by €STR. Contracts and financial instruments referencing EURIBOR do not need to transition to a new rate. However, fallback provisions must be incorporated in those contracts. The working group recommends, among other things, that market participants should:
The working group has also provided a generic EURIBOR fallback provision.
View the report.
View details of the working group's January 2019 recommendations.
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