On 24 July 2020, the European Central Bank (ECB) issued a public consultation on the publication by it of compounded term rates using the euro short-term rate (€STR).

The motivation behind the consultation is that the ECB is to provide benchmark users with compounded values of the €STR for selected maturities. These values will be published every TARGET2 day, similarly to the €STR itself. This initiative has two aims:

  • In line with the recommendations from the Financial Stability Board, to encourage and support the wider use of the near-risk-free rates (RFRs) and hence the €STR, by providing a “golden source” for the compounded €STR values.
  • In line with the EU Benchmarks Regulation, to provide a rate that may be used in contractual fall-back provisions by users of the EUR LIBOR and EURIBOR who are required to prepare in their contingency planning for a scenario in which the EUR LIBOR and the EURIBOR may cease to exist.

The consultation seeks feedback from market participants and benchmark rate users about a number of parameters that would be applied when publishing these compounded values.

The deadline for comments on the ECB consultation is 11 September 2020.