EMMI Euribor Methodology Changes


On Oct. 11, EMMI proposed changes to Euribor hybrid methodology.


  • EMMI published a consultation paper inviting feedback on proposed changes to Euribor methodology reformulation of level 2.3 and discontinuation of level 3.
  • Consultation paper outlines EMMI's efforts to further enhance Euribor’s methodology and invites feedback from market participants, interested parties and stakeholders.
  • Follows EMMI Jun. 2022 on EURIBOR Hybrid Methodology review, see #142027.
  • Proposed Changes
  • Proposed changes are designed to address specific aspects of the benchmark while preserving its core characteristics; key elements under consideration are as follows.
  • Reformulation of level 2.3 by introducing a number of changes, in particular enlarging starting point for its calculation, and redefining the market adjustment factor (MAF) to better reflect changes in interest rates as well as changes in the perceived credit risks.
  • Discontinuation of level 3: the reformulation of level 2.3 with its proposed features will allow to discontinue level 3 in the current hybrid methodology.
  • Euribor Panel Banks’ operational, cost burdens would diminish, providing opportunity to expand Euribor Panel, while maintaining benchmark's reliability and characteristics.
  • Next Steps
  • After conclusion of consultation process, EMMI will provide its rationale for acceptance, modification or rejection of recommendations made by respondents to consultation.
  • On this date, EMMI also intends to communicate the conclusions of the proposed enhancements in Euribor’s methodology, as well as implementation plans.
  • Summary of stakeholder feedback will be made public by the end of Feb. 2024.
  • Consultation End
  • Feedback must be submitted by Dec. 11, 2023.
  • Mar. 2024 Consultation Outcome
  • On Mar. 6, 2024, EMMI issued final results of its consultation on Euribor methodology.
  • The proposals garnered overwhelmingly positive responses, gave valuable insights.
  • Broad support for strengthening of Level 2.3, discontinuation of Level 3 from Euribor hybrid methodology, enlargement of Level spectrum for proposed Level 2.3 calculation.
  • Also on proposals to redefine Level 2.3's market adjustment factor, though comments led to marginal revision in proposed methodology, adding additional control parameter.
  • Respondents supported dynamic rate and volume threshold test, Efterm as input data for interest rate change component, and Euribor v Efterm spread as input data.
  • Large majority agreed on discontinuation of Level 3 due to Level 2.3 reformulation.
  • Implementation of enhancements to Euribor hybrid methodology will be implemented in the course of 2024, with gradual approach in migrating to the new methodology.
  • Approach aims to aid smooth transition, minimize disruption to market participants.
  • Phase-in process is expected to begin in May 2024, and should take around 6 months.

Regulators EMMI
Entity Types B/D; Bank; Depo; Exch
Reference PS D0023-2024, PR, 3/6/2024; CP D0323-2023, PR 10/11/2023; IBOR
Functions Accounting; Compliance; Financial; Legal; Operations; Reporting; Risk; Trade Reporting; Trading; Treasury
Countries EU Exchange
Category
State
Products Banking; Clearing; Commodities; Corporate; Deposits; Derivatives; Equity; Fixed Income; Forex; Issuance/IPO; Loan; MMF: Money Market Fund; Repo/Reverse; Securities
Regions EMEA
Rule Type Final
Rule Date 10/11/2023
Effective Date 5/1/2024
Rule Id 187843
Linked to Rule :142027
Reg. Last Update 3/6/2024
Report Section EU

Last substantive update on 03/11/2024