Interest rate benchmarks

Interest rate benchmarks are essential for the smooth functioning of the financial market and are widely used by banks and other market participants. The ECB also relies on benchmarks when operationalising and monitoring the transmission of its monetary policy.

Interest rate benchmarks are currently undergoing in-depth reforms. The ECB decided to take action as benchmark rates have an important anchoring role for contracts in financial markets. The ECB has launched two initiatives in this field:

• the development of a daily euro unsecured overnight interest rate, called the euro short-term rate (€STR)
• the set-up of an industry working group, together with other European institutions, tasked with identifying alternative risk-free rates for widespread adoption

Euro short-term rate (€STR)

The ECB decided to develop a euro short-term rate (€STR), which will reflect the wholesale euro unsecured overnight borrowing costs of euro area banks. The €STR will complement existing benchmark rates produced by the private sector and will be available by October 2019 at the latest.

To ensure transparent communication, the ECB is committed to consulting the public at various stages. Two public consultations have been held and a summary of responses was published for each.

The calculation method is now also available, as well as preliminary figures, referred to as the pre-€STR.

Find out more

Working group on euro risk-free rates

This working group was set up to identify and recommend alternative risk-free rates. It is an industry-led group, chaired by a representative from the private sector. The ECB provides the secretariat.

On 13 September 2018 the working group agreed on the euro short-term rate as the most appropriate rate and encourages market participants to prepare for the transition to the new rate.

Find out more