Rush to ex­tend life of EU rate bench­mark

Yorkshire Post - - MARKET REPORT -

EU­RO­PEAN LAW­MAK­ERS are work­ing against the clock to ex­tend the life of a dis­cred­ited in­ter­est rate bench­mark and avert a crunch that would af­fect tril­lions of eu­ros worth of con­tracts, a se­nior of­fi­cial said on Fri­day.

The EONIA bench­mark is based on the rate Eu­ro­pean banks charge for lend­ing to each other overnight and is pub­lished by in­dus­try or­gan­i­sa­tion, the Eu­ro­pean Money Mar­ket In­sti­tute (EMMI).

But banks have shied away from this form of lend­ing fol­low­ing the fi­nan­cial cri­sis and a se­ries of ma­nip­u­la­tion scan­dals in­volv­ing other bench­mark rates such as Li­bor and the EMMI’s Eu­ri­bor rates on longer-term loans.

Tilman Lueder, head of the se­cu­ri­ties mar­kets unit at the Eu­ro­pean Com­mis­sion, said two amend­ments had been tabled to al­low the fi­nan­cial in­dus­try to keep us­ing EONIA in 2020 but time was “tight” due to EU elec­tions in the spring.

He added dis­cus­sion on the mat­ter be­tween the Eu­ro­pean Par­lia­ment, the Coun­cil and the Com­mis­sion wouldn’t start be­fore Jan­uary and law­mak­ers would then break off in March for the vote.

“Tim­ing is there­fore tight and the fu­ture of the amend­ments is un­cer­tain,” he told a con­fer­ence at the Eu­ro­pean Cen­tral Bank (ECB).

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