New benchmark rates to replace Swiss Libor, EONIA next year, EU says -Breaking
By Foo Yun Chee
BRUSSELS, (Reuters) – Two new benchmark interest rates will replace the Swiss Libor Rate and the Euro Overnight Index Average in financial instruments and contracts starting next year. This was announced by the European Commission on Friday.
They’ll be replaced by “risk-free rates”, which will be compiled centrally by banks.
Both the Swiss Libor and EONIA, which form the basis for a range of financial contracts such as mortgages, bank overdrafts, and other more complex financial transactions, will cease to be published at the end of this year.
In the aftermath of attempts to manipulate Libor and other benchmark rates, regulators around the globe are trying to shift to risk-free rates. This is in response to the recent billion-dollar fines imposed on some of the largest banks in the world.
According to the EU executive, the need for new rates was due to outstanding contracts which reference the Swiss Libor or EONIA.
In a statement, the Commission explained that the statutory replacement would be automatically effective from January 2022. Contracts can then continue as usual without any intervention by contract parties.
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