3 Questions to Jean-Louis Schirmann on the use of EURIBOR - EFAMA
07/06/2021 EFAMA Visit source website Download PDFQ #1 How was Euribor impacted by the adoption of
the Benchmark Regulation (BMR) and what are the relevant features
of the reformed Euribor for investment managers?
Euribor rates are used by investment funds across all kinds of
asset classes and financial instruments, such as swaps, swaptions,
other nonlinear derivatives, bonds, loans and asset backed
securities. Euribor is also used as a benchmark for performance fee
calculation and as a discounting curve for certain products.
For over 20 years now, Euribor has been a trusted and reliable reference for the euro money market and, back in 2016, it was declared a critical benchmark by the European Commission. With BMR-compliance as an objective, The European Money Markets Institute has successfully taken on actions as early as 2015 to ensure Euribor’s continued sustainability, reliability, and integrity. We have in this regard considerably strengthened the benchmark by putting in place a rock-solid Governance Framework consisting of effective control and oversight arrangements for the administrator, for the contributors, and for the calculation agent. We also maintain an independent Oversight Committee of market experts which supervises the application of this Governance Framework.
In parallel, we have broadly consulted the market to devise and develop a fit-for-purpose ‘hybrid’ methodology for Euribor, which - since November 2019 - is no longer based on quotes but rather grounded in transactions in the unsecured euro money market. The contributions to the determination of Euribor by the 18 Panel Banks – which are fully representative of the underlying market – follow a three-level hierarchical approach.