[ESMA81-1071567537-121 ] Working Group on Euro Risk-Free Rates Final Statement

The Euro Risk-Free Rates Working Group, led by ESMA, has completed its mission of reforming EU interest rates. The group identified the €STR as the risk-free rate for the euro area and defined fallback provisions for EURIBOR across various asset classes. ESMA encourages the industry to embed robust fallback provisions, especially for financial products referencing EURIBOR, such as mortgages. The working group, established in 2018, officially concluded its activities on November 13, 2023.
Key achievements include the successful transition from EONIA to €STR at the end of 2021, increased adoption of €STR in derivative markets, and the availability of forward-looking Term Rate versions of €STR (term €STR). The group also addressed EURIBOR fallback triggers, recommended fallback rates, and surveyed the adoption of fallback provisions in different asset classes.
While EURIBOR is not set to be discontinued, the Working Group emphasizes the importance of adopting robust fallbacks to preserve financial stability. It highlights the need for continued efforts, especially in cash products like mortgages, to increase contractual robustness. The group also recognizes the importance of fallbacks in compliance with Article 28(2) BMR.
Looking forward, the group emphasizes the successful discontinuation of LIBOR settings and recommends transitioning contracts using non-representative synthetic USD LIBOR to appropriate alternatives. The ESMA may reconvene the Working Group for future activities related to benchmarks.