Reform

Recalibrated Methodology

In 2016 and 2017, The European Money Markets Institute organised the ‘Eonia^® Review Exercise’, a programme which sought to enhance the governance and control framework of Eonia^®, and to align it with the requirements of the EU Benchmarks Regulation (BMR).

In May 2018, based on the analyses performed in the context of the Review Exercise, and on information about the overnight unsecured segment of the euro money market published by the European Central Bank (ECB), it was decided not to pursue the Eonia^® Review Exercise.

In September 2018, the working group on euro risk-free rates (RFR WG) recommended replacing Eonia^® with a new risk-free rate, as Eonia^® would no longer meet the criteria of BMR and would therefore see its use restricted as from 1 January 2020.

Subsequently, in March 2019, the RFR WG recommended a transition from Eonia^® to €STR, the euro short-term rate of the ECB which relies on data collected by the Eurosystem. Since 1 October 2019, Eonia^® is calculated following the recalibrated methodology directly tracking the €STR and calculated as the €STR plus a spread of 8.5 basis points.

On 2 October 2019, the €STR was published for the first time by the ECB at 08:00 CET. The €STR reflects the wholesale euro unsecured overnight borrowing costs of euro area banks and complements existing benchmark rates. Eonia^® was published under the recalibrated methodology for the first time on the same day.

In parallel, The European Money Markets Institute applied for BMR authorisation by its supervisor, the Belgian Financial Markets and Services Authority (FSMA), for the administration of Eonia^® under the recalibrated methodology.

Since 2 October 2019, the Eonia^® rate for day T is available every TARGET2 day on T+1, at or shortly after 09:15 CET. This timing prevents market participants from being exposed to any additional Eonia^® re-fixing, should there be an €STR re-fixing.

In December 2019, the European Money Markets Institute received an authorisation by its supervisor, the FSMA, for the provision and administration of the recalibrated Eonia^® under BMR, allowing the benchmark users to continue using it until 3 January 2022, the date on which Eonia^® was discontinued.

In order to guarantee a smooth transition for all Eonia^® users, The European Money Markets Institute continued to publish Eonia^® under the recalibrated methodology every TARGET2
day until the benchmark’s permanent cessation date.