Danske Bank monitors the developments on a continuous basis. This page will be updated regularly.
Latest developments
Transition from EONIA to €STR
On the 2nd of October 2019, the new EURO short-term rate (€STR) was published for the first time by the ECB. On the same date, EONIA stopped as an independent fixing. Instead, EONIA is now calculated as €STR + a fixed spread of 8.5 basis points (bp.)
In order to give the markets time to transition fully to €STR, EONIA will continue to be published until the end of 2021. As of the 3rd of January 2022, EONIA will no longer be published.
This transition is one of many steps in a significant paradigm shift to strengthen the methodology behind reference rates so that the methodology is based more on actual transactions and less on estimates. This will strengthen the benchmarks and make them more resilient and robust.
- Will my current EONIA facilities have to be renegotiated or amended before the 2nd of October 2019?
- How has the spread of 8.5 bp. been calculated?
- What happens to new facilities after the 2nd of October?
- So there is no change?
What does it mean for me as a Danske Bank customer?
Background for the Transition
Benchmark rates are used to determine interest rates and payment obligations for a vast number of financial products such as for instance loans, bonds and derivatives. In Europe, the most used benchmarks are EURIBOR (Euro Interbank Offered Rate), EONIA (European Over-Night Index Average) and LIBOR (London Interbank Offered Rate).
Due to a number of manipulation scandals and decreasing activity and liquidity in the underlying markets of several of the interest rate benchmarks, the financial regulatory authorities have expressed concerns with respect to the current benchmark rates over the years. In 2014, the Financial Stability Board published recommendations to reform the market for reference rates and move to the use of risk-free rates (RFRs). Separately, in 2013 the IOSCO published its Principles for Financial Benchmarks, which were endorsed by the G20 leaders, and have led to regulative initiatives globally in order to strengthen the credibility and representativeness of interest rate benchmarks.
A key objective of the transition is the creation of an interest rate market based on actual transactions. This will lead to a more transparent, reliable and representative interest rate market. Danske Bank fully supports this objective and will therefore be ready to offer €STR products as soon as the new rate is published from 2nd of October 2019.
The EONIA-€STR transition is only the first among a series of IBOR transitions which will be coming over the next few years.
- ECB - ESTR questions and answers - updated periodically
- ECB -Transition impact from EONIA to €STR on cash and derivatives products (August 2019)
- ECB - €STR methodology and policies (June 2018)
- ECB on Benchmark Rates (latest update July 2019)
