The European Insurance and Occupational Pensions Authority (EIOPA) has launched a consultation on the Interbank Offered Rates (IBOR) transitions. Across markets, IBOR is being replaced by risk-free rates.
The consultation considers adjustments to EIOPA’s risk-free rate (RFR) methodology and production, in light of If the EU Benchmark Regulation (which came into force in 2018) which requires financial benchmarks to be transparent and to measure the underlying economic reality in a representative way. In addition, the London Interbank Offer Rate (LIBOR) will be coming to an end at the end of 2021. EIOPA seeks to adopt a common approach, for all currencies on the transition to the new rates in order to continue producing consistent RFR term structures.
EIOPA produces risk free rate term structures that for many currencies have been based on IBOR based swaps. Based on the new legal requirement these structures would need to be changed as they can no longer be based on existing instruments. Therefore, EIOPA intends to adjust its RFR production to the new reality by adopting a common approach for all currencies on the transition to the new rates.
EIOPA published a discussion paper on IBOR transitions in January 2020.
The proposed approach takes into consideration recent market developments and responses received to the discussion paper published in January 2020.
Responses to the consultation should be submitted via the EU Survey Tool by 23 July 2021.