The Euro Interbank Offered Rate (Euribor) is a daily reference rate, published by the European Money Markets Institute, [1] based on the averaged interest rates at which Eurozone banks borrow unsecured funds from counterparties in the euro wholesale money market (or interbank market). Prior to 2015, the rate was published by the European Banking Federation. [2]
Euribors are used as a reference rate for euro-denominated forward rate agreements, short-term interest rate futures contracts and interest rate swaps, in very much the same way as LIBORs are commonly used for Sterling and US dollar-denominated instruments. They thus provide the basis for some of the world's most liquid and active interest rate markets.
Domestic reference rates, like Paris' PIBOR, Frankfurt's FIBOR, and Helsinki's Helibor merged into Euribor on EMU day on 1 January 1999.
Euribor should be distinguished from the less commonly used "Euro LIBOR" rates set in London by 16 major banks. [3]
A representative panel of banks provide daily quotes of the rate, rounded to two decimal places, that each Panel Bank believes one prime bank is quoting to another prime bank for interbank term deposits within the Euro zone, for maturity ranging from one week to one year. Every Panel Bank is required to directly input its data no later than 11:00 a.m. (CET) on each day that the Trans-European Automated Real-Time Gross-Settlement Express Transfer system (TARGET) is open. At 11:02 a.m. (CET), GRSS (Global Rate Set Systems) will instantaneously publish the reference rate on Refinitiv (ex. Reuters), Bloomberg and a number of other information providers which will then be made available to all their subscribers. The published rate is a rounded, truncated mean of the quoted rates: the highest and lowest 15% of quotes are eliminated, the remainder are averaged and the result is rounded to 3 decimal places. Euribor rates are spot rates, i.e. for a start two working days after measurement day. Like US money-market rates, they are Actual/360 , i.e. calculated with an exact daycount over a 360-day year. Euribor was first published on 30 December 1998 for value 4 January 1999.
Country | Banks [4] |
---|---|
Austria | Raiffeisen Bank International |
Belgium | Belfius |
France | BNP-Paribas |
France | HSBC France |
France | Natixis |
France | Crédit Agricole |
France | Société Générale |
Germany | Deutsche Bank |
Germany | DZ Bank |
Italy | Intesa Sanpaolo |
Italy | UniCredit |
Luxembourg | Banque et Caisse d'Épargne de l'État |
Netherlands | ING Bank |
Portugal | Caixa Geral de Depósitos (CGD) |
Spain | Banco Bilbao Vizcaya Argentaria |
Spain | Banco Santander |
Spain | CECABANK |
Spain | CaixaBank |
UK | Barclays |
Country | Banks | Date of exit |
---|---|---|
Greece | National Bank of Greece | 28 May 2019 |
Italy | Banco BPM | 7 January 2019 |
UK | JP Morgan International - London | 16 September 2016 |
Japan | The Bank of Tokyo Mitsubishi | 1 July 2016 |
Finland | Pohjola Bank | 13 May 2016 |
Finland | Nordea | 18 December 2015 |
Denmark | Danske Bank | 14 May 2015 |
Germany | Commerzbank | 1 October 2014 |
France | La Banque Postale | 11 April 2014 |
Belgium | KBC Bank | 1 April 2014 |
France | Crédit Industriel et Commercial | 31 March 2014 |
Italy | UBI Banca | 10 March 2014 |
Ireland | Bank of Ireland | 15 February 2014 |
Austria | Erste Group | 11 October 2013 |
Germany | Norddeutsche Landesbank Girozentrale | 29 June 2013 |
Ireland | Allied Irish Bank | 29 June 2013 |
Germany | Landesbank Hessen-Thüringen Girozentrale | 1 June 2013 |
Germany | Landesbank Baden-Württemberg | 1 June 2013 |
Germany | LandesBank Berlin | 1 May 2013 |
Germany | UBS | 28 March 2013 |
Sweden | Handelsbanken | 20 March 2013 |
Netherlands | Rabobank | 3 January 2013 |
Germany | BayernLB | 1 January 2013 |
Germany | Deka Bank | 30 November 2012 |
USA | Citibank | 21 September 2012 |
EUR Euribor futures are traded on Intercontinental Exchange (ICE) [5] and on Eurex [6]
They were previously also traded on CurveGlobal, part of the London Stock Exchange Group, [7] which has closed down operations in January 2022.
Interest rate swaps based on short Euribors currently trade on the interbank market for maturities up to 50 years. A "five-year Euribor" will be in fact referring to the 5-year swap rate vs 6-month Euribor. "Euribor + x basis points", when talking about a bond, will mean that the bond's cash flows have to be discounted on the swaps' zero-coupon yield curve shifted by x basis points in order to equal the bond's actual market price.
The other widely used reference rate in the euro-zone is €STR, published by the European Central Bank.
In finance, an interest rate swap (IRS) is an interest rate derivative (IRD). It involves exchange of interest rates between two parties. In particular it is a "linear" IRD and one of the most liquid, benchmark products. It has associations with forward rate agreements (FRAs), and with zero coupon swaps (ZCSs).
The London Inter-Bank Offered Rate is an interest rate average calculated from estimates submitted by the leading banks in London. Each bank estimates what it would be charged were it to borrow from other banks. It is the primary benchmark, along with the Euribor, for short-term interest rates around the world. Libor was phased out at the end of 2021, and market participants are being encouraged to transition to risk-free interest rates such as SOFR and SARON.
In finance, a forward rate agreement (FRA) is an interest rate derivative (IRD). In particular it is a linear IRD with strong associations with interest rate swaps (IRSs).
A reference rate is a rate that determines pay-offs in a financial contract and that is outside the control of the parties to the contract. It is often some form of LIBOR rate, but it can take many forms, such as a consumer price index, a house price index or an unemployment rate. Parties to the contract choose a reference rate that neither party has power to manipulate.
Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the principal amount on maturity. Fixed-income securities can be contrasted with equity securities that create no obligation to pay dividends or any other form of income. Bonds carry a level of legal protections for investors that equity securities do not: in the event of a bankruptcy, bond holders would be repaid after liquidation of assets, whereas shareholders with stock often receive nothing.
Eonia was computed as a weighted average of all overnight unsecured lending transactions in the interbank market, undertaken in the European Union and European Free Trade Association (EFTA) countries by a Panel of banks subject to the Eonia Code of Conduct.
SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market. It is similar to the widely used LIBOR, and Euribor. Using SIBOR is more common in the Asian region and set by the Association of Banks in Singapore (ABS).
An interest rate future is a financial derivative with an interest-bearing instrument as the underlying asset. It is a particular type of interest rate derivative.
SONIA is the effective reference for overnight indexed swaps for unsecured transactions in the Sterling market. SONIA is a risk-free rate.
In finance, a currency swap is an interest rate derivative (IRD). In particular it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. It has pricing associations with interest rate swaps (IRSs), foreign exchange (FX) rates, and FX swaps (FXSs).
TIBOR stands for the Tokyo Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Japan wholesale money market. TIBOR is published daily by the JBA TIBOR Administration.
The Asian Clearing Union (ACU) was established on December 9, 1974, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). The primary objective of ACU, at the time of its establishment, was to secure regional co-operation regarding the clearing of eligible monetary transactions among the members of the Union to provide a system for clearing payments among the member countries on a multilateral basis.
The overnight rate is generally the interest rate that large banks use to borrow and lend from one another in the overnight market. In some countries, the overnight rate may be the rate targeted by the central bank to influence monetary policy. In most countries, the central bank is also a participant on the overnight lending market, and will lend or borrow money to some group of banks.
The Shanghai Interbank Offered Rate is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Shanghai wholesale money market. There are eight Shibor rates, with maturities ranging from overnight to a year. They are calculated from rates quoted by 18 banks, eliminating the four highest and the four lowest rates, and then averaging the remaining 10.
An overnight indexed swap (OIS) is an interest rate swap (IRS) over some given term, e.g. 10Y, where the periodic fixed payments are tied to a given fixed rate while the periodic floating payments are tied to a floating rate calculated from a daily compounded overnight rate over the floating coupon period. Note that the OIS term is not overnight; it is the underlying reference rate that is an overnight rate. The exact compounding formula depends on the type of such overnight rate.
The interbank lending market is a market in which banks lend funds to one another for a specified term. Most interbank loans are for maturities of one week or less, the majority being overnight. Such loans are made at the interbank rate. A sharp decline in transaction volume in this market was a major contributing factor to the collapse of several financial institutions during the financial crisis of 2007–2008.
SARON stands for Swiss Average Rate Overnight and is a measurement of the overnight interest rate of the secured funding market denominated in Swiss Franc (CHF). It is based on transactions and quotes posted in the Swiss repo market, and is administered by SIX.
The Libor scandal was a series of fraudulent actions connected to the Libor and also the resulting investigation and reaction. Libor is an average interest rate calculated through submissions of interest rates by major banks across the world. The scandal arose when it was discovered in 2012 that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were. Libor underpins approximately $350 trillion in derivatives. It is currently administered by Intercontinental Exchange (ICE), which took over running the Libor in January 2014.
The Euro Short-Term Rate (€STR) is a reference rate for the euro currency. This interest rate can be used as the rate referenced in financial contracts that involve the euro. €STR is administered and calculated by the European Central Bank (ECB), based on the money market statistical reporting of the Eurosystem. According to the indications of the working group on euro risk-free rates, €STR replaced the Euro Overnight Index Average (EONIA) as the Euro risk-free rate for all products and contracts.