Euro money market benchmarks

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Benchmark rates are widely used as a reference for contracts and financial transactions.

The availability of accurate and robust benchmark rates plays a pivotal role for the integrity of financial markets, monetary policy and financial stability. In Italy, benchmark rates are used for a wide range of financial instruments (e.g. CCTs, corporate bonds and derivative contracts), and for indexing mortgages and bank loans to households and firms.

In recent years, with the aim of strengthening the integrity and representativeness of benchmark rates, endangered by some cases of manipulation and by a significant decrease in trade on the unsecured interbank money market, an in-depth reform process has gotten under way.

Regulation 2016/1011 (Benchmark Regulation - BMR) defined the new European legal framework for benchmark rates, adapting their calculation methodology to international principles. The Bank of Italy has been designated as the National Competent Authority, in line with Article 4-septies(1) of the Consolidated Law on Finance (TUF).

Currently, the most widely used European benchmark rates are €STR, administered by the European Central Bank (ECB) and published since 2 October 2019, and EURIBOR, administered by the European Money Markets Institute (EMMI), whose reform was completed in November 2019.

The Bank of Italy contributes to the work at European level, both by participating in the EURIBOR supervisory college jointly with Consob, the Italian securities market regulator, and by being directly involved in the Eurosystem initiatives related to the production of  €STR.

Owing to the ample and widespread use of indices in the financial system, the transition to the new benchmarks is a complex process. It is therefore essential that banking and financial intermediaries promptly identify and take all the initiatives necessary to ensure an orderly transition to the new benchmark rates, with regard to both customer relationships and their organizational and operative frameworks.

Useful links

ECB, Why are benchmark rates so important?

ECB, Working group on euro risk-free rates

EMMI, Blueprint for the hybrid methodology for the determination of EURIBOR, February 2019

ESMA, Benchmarks

BMR, Benchmark Regulation

FSB, Financial Benchmarks

ECB, Euro short-term rate (€STR)

ECB, Euro short-term rate (€STR) questions and answers