Consultation on developing an Euro unsecured overnight interest rate (EUOIR) to run to 12 January 2018

On 29 November 2017 the European Central Bank (ECB) launched its first consultation in relation to its new overnight benchmark rate that it plans to have in place by 2020. This central bank led alternative would complement existing private sector rates and also serve as a "backstop to private sector benchmark rates". The ECB also announced the creation of a new working group tasked with developing the new risk-free overnight reference rates for the Eurozone (the RFOR Working Group) and launched a launched a call for participants to join that group. The RFOR Working Group is influential as it is the body that will decide whether to adopt EUOIR or an alternative to EUOIR as an appropriate (nearly) risk-free reference rate. Similar activity is being undertaken by global peers, notably the Bank of England. Both the ECB's consultation process and the submission date to join the RFOR Working Group will close on 12 January 2018. This Client Alert assesses the content of the ECB’s first consultation on EUOIR and how this might affect the private sector and its transition to meet the compliance challenges of the EU’s Benchmarks Regulation that starts 1 January 2018 as well as the range of replacement rates being finalised and coming online before 2020.

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