IBOR

EURIBOR is used widely across many different banking products and any change to its methodology is of interest to both Danske Bank and our customers. EURIBOR is a daily reference rate published by EMMI, representing the rate at which credit institutions in the EU can borrow wholesale funds in euros in the unsecured money markets. EURIBOR is calculated for 1-week, 1-month, 3-month, 6-month and 12-month tenors, and published at or shortly after 11:00 a.m. CET on each TARGET 2 business day. EURIBOR, like LIBOR therefore, is a forward-looking term rate. Approximately €109 trillion of derivative contracts are linked to EURIBOR. 

Learn much more on the EURIBOR transition on the EMMI website

Danske Bank expects CIBOR to be provided in the years to come by the new administrator, Danish Financial Benchmark Facility ApS (DFBF). 

At present, we expect CIBOR to be provided based on the existing methodology and we do not expect any changes to client contracts or products in use by clients.

Swedish Banker's Association has established a working group to develop a complement and/or alternative to STIBOR. The objective

is to create a short-term interest rate in line with those in other currency areas. 

STIBOR is a critical benchmark Sweden has not yet begun a  transition from STIBOR to an alternative reference rate.

 No. Your current EONIA facilities will continue unchanged for now. However, after the 2nd of October 2019 EONIA will be calculated as  €STR plus a spread of 8.5 bp.

Your EONIA facilities will have to be converted to a new interest rate before before the 31st of December 2021, as this is the end-date for the transitional period granted by the European authorities. This new interest rate will most likely be €STR or possibly €STR plus a spread.

We recommend that €STR is used from the 2nd of October. However, EONIA will still be offered as an option for facilities that expire before the end of 2021.

EONIA will officially be discontinued at the end of 2021. As the market for €STR grows and holds more liquidity, it will be natural to prefer the use of €STR over EONIA.

While your EONIA facilities will continue as usual (until end 2021), the publication time of the EONIA fixing will change. As EONIA will be published as €STR plus a spread the publication time will follow €STR. €STR will be available at 08:00 CET based on transactions made on the previous trading day (also referred to as T+1). Hence, the publication time of EONIA will move to 09:15 CET. As a consequence, EONIA will also be published one day later than is the case today. While this does not have a financial impact, it can have significant practical implications that differ from counterpart to counterpart. Please contact your Relationship Manager in Danske Bank if you would like to know more.

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. 

Describes more in detail the design and framework around €STR, among other things: data collection, publication and contingency arrangements. Click here to open.