On 11 October 2023, the European Money Markets Institute (EMMI) published a consultation paper (CP) on enhancements to EURIBOR’s hybrid methodology.
The consultation paper outlines EMMI’s efforts to further enhance EURIBOR’s methodology and invites feedback from market participants, interested parties and stakeholders at large.
EMMI’s commitment to maintaining the integrity and reliability of the EUROBOR benchmark has led to a comprehensive review of its methodology. The proposed changes are designed to address specific aspects of the benchmark while preserving its core characteristics.
The key elements under consideration, outlined in the CP are:
- Reformulation of Level 2.3 by introducing a number of changes, in particular enlarging the starting point for its calculation, and redefining the Market Adjustment Factor to better reflect changes in interest rates as well as changes in the perceived credit risks.
- The reformulation of Level 2.3 with its proposed features will allow for the discontinuation of Level 3 in the current hybrid methodology. As a consequence, Euribor Panel Banks’ operational and cost burdens would significantly diminish and provide an opportunity to expand the Euribor Panel while maintaining the benchmark’s reliability and characteristics.
The deadline for feedback to the consultation is 11 December 2023, after which EMMI will evaluate the responses received and consider adjustments to the EURIBOR methodology. A summary of stakeholder feedback will be made public by the end of February 2024 in an aggregate form and in a way that individual respondents cannot be readily identified. However, EMMI retains the right to make public the stakeholder’s name as part of a list of entities which provided feedback, unless the respondent requires anonymity.