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ECB advisory group urges swift action on Eonia benchmark transition

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ECB advisory group urges swift action on Eonia benchmark transition

A working group advising the European Central Bank is urging financial market participants to actively shift floating rate options referencing the euro overnight index average benchmark rate, or Eonia, to the euro short-term rate, or €STR, before the end of 2021.

The ECB said in 2018 that €STR will replace Eonia, effective Oct. 2, as it no longer meets the criteria under the EU benchmarks regulation, and Eonia is set to be discontinued as of Jan. 3, 2022.

The private sector working group on euro risk-free rates, for which the ECB provides the secretariat, also recommended that central counterparty clearing houses align their discounting switch dates as much as possible for the transition between the two benchmarks and set the discounting switch date as early as possible and preferably near the end of the second quarter of 2020.

The group also said market participants should introduce necessary changes to be able to issue, buy, trade and manage new securities indexed to the €STR instead of issuing new securities indexed to Eonia with maturities extending beyond the transition period.

Earlier, Steven van Rijswijk, head of the working group, told the Financial Times that European banks and other financial firms will have to accelerate their preparations for the phasing out of the Eonia benchmark, which prices derivatives, loans and bonds worth over €24 trillion.