On 21 September 2020, the European Securities and Markets Authority (ESMA) published a speech by its chair, Steven Maijoor, entitled 2021: A defining moment for the interest rates reform.
In his speech Mr Maijoor discusses recent and expected developments of the global interest rates reform and the crucial role that the cooperation between public authorities and the financial industry is playing in this process.
Key points in the speech include:
- We are soon approaching the first-year anniversary of the Euro Short-Term Rate, or €STR1, which has been published by the European Central Bank (ECB) since 2 October 2019. €STR will replace the previous euro overnight rate, EONIA, which will be discontinued on 3 January 2022. In the next months and in 2021 the transition efforts should focus on completing the switch from EONIA to €STR and thus providing deeper €STR liquidity. To further enhance the role of €STR in the European financial system, this summer the ECB launched a consultation seeking feedback on the publication of compounded €STR by the ECB. This consultation ended in mid-September and its result should be published shortly. The publication of compounded €STR by the ECB would represent an important step forward, strengthening the interest rate landscape in the euro area.
- During the recent outbreak of COVID-19, EURIBOR continued to be regularly published by its administrator. While the liquidity in the underlying market started to decrease between Q1 and Q2 this year, since May it has started to improve again, moving back to the levels seen before COVID-19.
- ESMA will become the supervisor of EURIBOR in January 2022, taking over from the Belgian FSMA. The discontinuation of EURIBOR is not part of ESMA’s plans. For ESMA, the robustness of contracts of the financial products that reference EURIBOR will be a supervisory priority.
- Public authorities in the UK, the US and elsewhere agree that the LIBOR transition effort needs to accelerate as the end of 2021 quickly approaches. Continued engagement from the private sector, in conjunction with a significant commitment by the public sector, is crucial in order to support this transformational effort.