Shearman & Sterling LLP | FinReg | European Central Bank Announces Publication Time for Euro Short-Term Rate
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  • European Central Bank Announces Publication Time for Euro Short-Term Rate
    The European Central Bank has announced the publication time for the new Euro short-term rate (or €STR) that will come into effect from October 2, 2019. €STR will represent the wholesale euro unsecured overnight borrowing costs of banks located in the euro area. The ECB has also published the final version of its Guideline in the Official Journal of the European Union. The Guideline is addressed to all Eurosystem central banks and will govern the rate and establish the responsibilities of the ECB and national central banks in determining and administering the rate.
    The rate will be determined in accordance with the ECB's Guideline. The Guideline prescribes, amongst other things: (i) how and when the €STR will be calculated; (ii) the responsibilities of the ECB as administrator of the rate; and (iii) the control framework within which the ECB and national central banks established in the euro area should operate when determining the rate. National central banks established in the euro area will be obliged to comply with the Guideline from October 1, 2019.
    On its website, the ECB has confirmed that as of October 2, 2019, the €STR will be published at 08:00 CET on each TARGET2 business day. A revised rate will be published by 09:00 CET on the same day if errors are discovered in the rate that impact it by more than two basis points. The ECB's Guideline, on the other hand, states the timing of publication will be 09:00am CET and 11:00am CET for the revised rate. It remains to be seen whether the ECB will provide clarification on this discrepancy.
    The ECB's announcement of the timing for publication of the new €STR comes ahead of the introduction of the €STR as a replacement for EONIA. From October 2, 2019, EONIA will be calculated according to an adjusted rate based on the risk spread between the new €STR and the existing EONIA rate. From January 3, 2022, EONIA will no longer be published and markets are expected to have adopted the €STR. The ECB has not yet commented on whether the €STR will be afforded the same "critical" benchmark status under the Benchmark Regulation as EONIA currently holds. The Guideline does make clear that the ECB will endeavour to apply the intention of the IOSCO Principles for Financial Benchmarks where relevant and possible in its administration of €STR and will publish a statement assessing its compliance with the IOSCO Principles within 12 months of the first publication date of the euro short-term rate. The compliance statement will be periodically reviewed by the ECB and an external auditor thereafter.
    View the ECB's announcement.
    View the ECB's Guideline.
    View details of the replacement of EONIA with the Euro short-term rate.
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