€STR

• 29 April 2021

  The Euro money market study 2020 finds that activity in the euro money market is still concentrated in the secured and foreign exchange swap segments, with the former accounting for about half of the total outstanding amounts.

• The study also analyses the introduction of the new euro short-term rate (STR), the ECB deposit facility interest rate cut in September 2019, the implementation of a two-tier system for remunerating credit institutions excess reserve holdings and the impact of the United Kingdoms departure from the European Union on the euro money market activity.
• The European Central Banks Euro money market study 2020 provides a detailed overview of the euro money markets.
• The study is based on daily transactions in the euro money market collected from the largest euro area banks under the Money Market Statistical Regulation[1] (MMSR).

• 18 March 2021

  The European Central Bank (ECB) will start publishing compounded STR average rates and a compounded index based on the euro short-term rate (STR) on 15 April 2021.

• Publication will take place on each TARGET2 business day at 09:15 CET and will include compounded STR average rates for tenors of 1 week, 1 month, 3 months, 6 months and 12 months, as well as a compounded STR index enabling the derivation of compounded rates for any non-standard tenor.
• The ECB is responding to market feedback in favour of having compounded rates based on the STR published regularly by a trusted authority.
• The compounded STR average rates and index will be published via the Market Information Dissemination (MID) platform and through the ECBs Statistical Data Warehouse (SDW).

• PRESS RELEASE

  ECB digital euro consultation ends with record level of public feedback

  13 January 2021

  The European Central Bank (ECB) concluded its public consultation on the digital euro yesterday and will now analyse in detail the large number of responses.

• The public consultation was launched on 12 October 2020, following the publication of the Eurosystem report on a digital euro.
• The ECB will publish a comprehensive analysis of the public consultation in the spring, which will serve as an important input for the ECBs Governing Council when deciding whether to launch a digital euro project.
• A digital euro would combine the efficiency of a digital payment instrument with the safety of central bank money.

SPEECH

Welcome address

Welcome address by Isabel Schnabel, Member of the Executive Board of the ECB, at the third roundtable on euro risk-free rates

• Frankfurt am Main, 14 December 2020 Good afternoon and welcome to the third roundtable of the industry working group on euro risk-free rates.
• Not least, it has forced us to transition to virtual modes of working.
• I very much hope that the public health situation will soon allow us to meet again in person.
• Todays roundtable will provide a platform to exchange views on the development of robust fallback provisions for EURIBOR, which remains a systemically relevant benchmark.

The motivation for robust EURIBOR fallback provisions

• As a result, EURIBOR is still used extensively in both new and legacy contracts for cash and derivatives products.
• Given that EURIBOR remains operational, why do we even need to discuss fallback arrangements?
• If the benchmark rate ceased to exist, the absence of a fallback rate would expose the counterparties to substantial risk.
• Fallback provisions therefore act as seatbelts for contractual arrangements in financial markets.
• In fact, there is already a legal requirement to use fallback provisions.
• In addition to these legal requirements, there is also a clear financial stability justification to ensure there are workable fallback provisions that reduce contractual uncertainties in the event of EURIBOR ceasing to exist.

Public consultations: the role of the €STR as a fallback rate

• However, this basic premise begs a more difficult question: what are feasible alternative rates that can be used if a fallback scenario is triggered?
• In an effort to address this question, the working group has recently launched two public consultations.
• The public consultations build on a common theme, namely the use of the ECBs STR in the proposed fallback measures.
• For the public consultation, the working group has used two alternative STR-based approaches to approximate a term rate that could serve as a fallback.
• Second, the working group has used realised values of the STR and compounded them over the interest period, thus deriving a backward-looking term rate.
• The STR is a suitable rate for use in EURIBOR fallback arrangements.

Discontinuation of EONIA: the urgent need for a rate transition

• As EONIA has been converted into a STR tracker rate, the benefits of switching to the STR may not be immediately obvious.
• There are two reasons why market participants should urgently work on their preparedness for an orderly transition from EONIA to the STR.
• First, the discontinuation of EONIA is imminent, with its last publication scheduled for 3 January 2022.
• If the proposed fallback provisions were ever activated, the market would have to rely extensively on the STR.
• The ECB will continue to facilitate the replacement of EONIA in euro area markets by maintaining a robust and representative STR.

Conclusion

• The STR is an ideal candidate for this transition.
• It can support market participants in building robust fallback procedures for a potential discontinuation of EURIBOR.
• Users should therefore swiftly replace EONIA and make wider use of the STR in cash and derivatives markets.
• I would also like to thank the ECB team that has been supporting the working group by providing the secretariat.
• I now wish all of you an insightful and productive roundtable.