Eonia Explained and Its Future Replacement

Eonia, short for Euro OverNight Index Average, is a benchmark interest rate for overnight deposits in euros. It's calculated as a weighted average of all unsecured overnight lending transactions between banks in the European Union.

Eonia is a crucial indicator of the eurozone's monetary policy, as it reflects the short-term interest rates in the market. The European Central Bank (ECB) uses Eonia as a reference rate for its monetary policy decisions.

Eonia has been widely used as a reference rate for financial instruments, such as derivatives and loans. It's also used by banks to set interest rates for their customers.

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The Euro Overnight Index Average (EONIA) is the average overnight reference rate for which European banks lend to one another in euros.

EONIA is a daily reference rate that expresses the weighted average of unsecured overnight interbank lending in the European Union and the European Free Trade Association (EFTA).

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It is calculated by the European Central Bank (ECB) based on the loans made by 28 panel banks, which are the most established banks in the EU and EFTA.

The EONIA rate represents the average overnight rate of these 28 panel banks, and it's considered an interbank rate, meaning it's the rate at which banks borrow from each other.

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EURIBOR is an interbank rate that represents the average interest rate at which European banks lend to and borrow from each other in euros for longer periods of time than EONIA.

The EURIBOR rate is used as a reference rate for a wide range of financial instruments, including loans and derivatives.

It's worth noting that regulatory reforms have also impacted EURIBOR, although the article doesn't specify the exact timeline or details of these changes.

EONIA is a daily reference rate that expresses the weighted average of unsecured overnight interbank lending in the European Union and the European Free Trade Association (EFTA).

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It's calculated by the European Central Bank (ECB) based on the loans made by 28 panel banks.

Banks must meet certain reserve requirements set by the central bank, which is the amount or percentage of total deposits that a bank must keep on hand and not lend out.

Reserve requirements help protect banks by ensuring they have enough cash or liquidity in case of loan losses, but banks can still experience short-term cash flow shortages.

The overnight rate is the rate at which banks borrow from each other to cover these shortages.

EONIA represents the average overnight rate of 28 established panel banks in Europe.

Since 1 October 2019, EONIA is calculated with a reformed methodology that tracks the €STR, the euro short-term rate of the European Central Bank (ECB).

The €STR reflects the wholesale euro unsecured overnight borrowing costs of euro area banks.

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Eonia was computed as a weighted average of all overnight unsecured lending transactions in the interbank market, undertaken in the European Union and European Free Trade Association (EFTA) countries by a Panel of banks.

The European Central Bank calculated Eonia reference rates based on all overnight interbank assets created before the close of RTGS systems at 6pm CET, and published through GRSS every day before 7pm CET.

Eonia was reported on an ACT/360 day count convention and displayed to three decimal places. Overnight means from one TARGET day to the next.

Here are the key characteristics of Eonia:

ESTER is a new benchmark rate for Europe, formed by the ECB in 2018 to replace EONIA. It's an overnight interest rate that represents an average of wholesale rates in Europe, used by banks and institutional investors.

ESTER is an improvement over EONIA because more banks will contribute to its average rate, making it more representative of the market. This change aims to prevent bank scandals that have occurred in the past using quote-based interest rates.

The ECB formed a working group to establish ESTER, which was recommended by the Euro Risk Free Rate Working Group as the alternative Euro risk-free rate to EONIA. ESTER's publication began on 2 October 2019.

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EONIA will be discontinued as an interest rate benchmark from 3 January 2022, but it may still be used in financial agreements until then. ESTER will replace EONIA, and its publication will be more frequent.

Here's a comparison of EONIA and ESTER:

ESTER is a more transparent and representative benchmark rate for Europe, and its implementation will help prevent future bank scandals.

Eonia is a daily reference rate that expresses the weighted average of unsecured overnight interbank lending in the European Union and the European Free Trade Association (EFTA). It is calculated by the European Central Bank (ECB) based on the loans made by 28 panel banks.

Eonia was computed as a weighted average of all overnight unsecured lending transactions in the interbank market, undertaken in the European Union and EFTA countries. The Eonia Code of Conduct governed these transactions.

Eonia was reported on an ACT/360 day count convention and displayed to three decimal places. Overnight refers to the period from one TARGET day to the next.

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The Eonia reference rate was published through GRSS every day before 7pm CET, under the ISIN identifier EU0009659945. It was calculated by the European Central Bank, based on all overnight interbank assets created before the close of RTGS systems at 6pm CET.

Eonia was replaced by the Euro Short-Term Rate (€STR) in 2019. The €STR is published by the ECB and reflects the wholesale euro unsecured overnight borrowing costs of euro area banks.

Here are the key dates related to Eonia:

Eonia was discontinued on 3 January 2022, after a public announcement in May 2019. The European Money Markets Institute encouraged users to finalize their transition to the €STR, a recommended replacement benchmark.

The discontinuation of Eonia was a gradual process, with Eonia and €STR coexisting until 31 December 2021. After that date, Eonia was no longer available for use as an interest rate benchmark.

The European Money Markets Institute repeatedly communicated the permanent discontinuation of Eonia to users. They advised users to take necessary actions to ensure a timely and successful transition to the €STR.

To ensure a smooth transition, users were encouraged to continue their repapering efforts and finalize their transition to the €STR. This will help prevent any disruptions to financial agreements that reference Eonia.

Here are the key steps to take after Eonia's discontinuation:

The ECB has published information on its website regarding Eonia and the recommended replacement benchmark, €STR. This information can be useful for those looking for more details on the discontinuation of Eonia.

Eonia was computed as a weighted average of all overnight unsecured lending transactions in the interbank market, undertaken in the European Union and European Free Trade Association (EFTA) countries by a Panel of banks.

The calculation was based on the Eonia Code of Conduct, and the rates were reported on an ACT/360 day count convention, displayed to three decimal places.

The European Central Bank calculated Eonia reference rates based on all overnight interbank assets created before the close of RTGS systems at 6pm CET.

Eonia was published through GRSS (Global Rate Set Systems) every day before 7pm CET, and it can be found under the ISIN identifier EU0009659945.

Eonia was replaced by the Euro Short-Term Rate (€STR) published by the ECB since October 2, 2019.

Eonia rates were available with a 24-hour delay, and they could be consulted for free on a backward rolling period of 25 publication days only.

These rates may solely be used for non-commercial purposes, and if you require access to live data, you can access it from an Authorised Vendor.

Eonia is calculated and published after the publication of the €STR, which the ECB does no later than 09:00 CET, making it available at, or shortly after, 09:15 CET on the TARGET2 day following the TARGET2 day of the market it intends to represent.

Here's a summary of the Eonia publication timeline:

EONIA has robust governance and oversight arrangements in place. This ensures that the system operates fairly and efficiently.

The administrator of EONIA is EMMI, which acts as the calculation agent. EMMI plays a crucial role in ensuring the accuracy and reliability of EONIA's calculations.

Reforms have been implemented to improve EONIA's methodology. The Recalibrated Methodology is a result of these reforms, which aim to make the system more accurate and representative of the euro area's interbank lending market.

Here are some key differences between EONIA and €STR:

Eonia's governance is built on robust arrangements that ensure transparency and accountability. This includes oversight from a governing body that sets the framework for Eonia's operations.

The governing body is responsible for making key decisions that impact Eonia's performance and stability. They work closely with other stakeholders to ensure Eonia's continued relevance and effectiveness.

Eonia's governance structure is designed to be flexible and adaptable to changing market conditions. This allows Eonia to stay ahead of emerging trends and challenges.

Eonia's robust governance arrangements provide a solid foundation for its operations. This foundation is built on a commitment to transparency, accountability, and good governance practices.

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The Eonia Recalibrated Methodology was a result of significant reforms.

To understand the steps that led to this change, let's take a closer look.

Learn about the steps leading to Eonia's Recalibrated Methodology.

The key differences between €STR and EONIA are pretty straightforward. The main administrator of EONIA is EMMI, whereas €STR is administered by the ECB.

EONIA's calculation methodology is based on adding 8.5 basis points to the €STR rate. In contrast, the methodology for €STR uses overnight unsecured fixed rate deposit transactions over €1 million.

EONIA is specifically used for inter-bank lending, reflecting the rate at which banks in the EU lend in the interbank money market in euros. This is in contrast to €STR, which will include other types of bank lending, such as money market funds and insurers.

Here's a summary of the key differences between EONIA and €STR:

Eonia rates were calculated by the European Central Bank, based on all overnight interbank assets created before the close of RTGS systems at 6pm CET.

The Eonia reference rate was published through GRSS every day before 7pm CET, and it was reported on an ACT/360 day count convention to three decimal places.

Eonia was replaced by the Euro Short-Term Rate (€STR) published by the ECB since 2nd of October 2019.

The Eonia Delayed and Live data can be accessed through an entry point, but no further information on how to access it is provided.

The RepoFunds Rate, on the other hand, was based on centrally cleared repos executed across both BrokerTec and MTS, and it was produced by NEX.

EURIBOR is an interbank rate used by banks to determine interest rates for various financial products.

EURIBOR is calculated by Global Rate Set Systems Ltd. and is comprised of the average interest rates from 19 large European banks.

EURIBOR has five interest rates based on loans with maturities ranging from one week to 12 months.

EURIBOR is used as a benchmark rate by banks, impacting interest rates for mortgage loans and savings accounts.

EURIBOR is offered by the European Money Markets Institute (EMMI), a non-profit organization founded in 1999.

The entry point to access Eonia Delayed and Live data is the rates. This is where you can find the information you need to make informed decisions.

To understand the RepoFunds Rate, it's based on centrally cleared repos executed across both BrokerTec and MTS. The index is a Volume Weighted Average Price (VWAP) on the remaining trades after 25% of trades are filtered to avoid "specials" having too much of an impact.

The RepoFunds Rate has impressive volumes, with €200.6bn on average per day for the fixing, but 25% are trimmed. You might need to remove 18% of that volume (~€43bn) as French repo trades are calculated as a spread to Eonia.

MTS volumes are not split from BrokerTec volumes, which could be a concern if MTS pulls out of the licensing agreement.

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EONIA will continue to be published under the same identification codes, i.e. Reuters Instrument Code or Bloomberg ticker.

Any financial agreements you have with MUFG will automatically reference the recalibrated EONIA methodology from 2 October 2019.

Calculations in your financial agreements that reference EONIA will be administered on the basis of the EMMI revisions to EONIA that took effect from 2 October 2019.

EONIA amendments under the recalibrated methodology will take effect from 2 October 2019.

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EONIA was computed as a weighted average of all overnight unsecured lending transactions in the interbank market, undertaken in the European Union and European Free Trade Association (EFTA) countries by a Panel of banks.

The Panel of banks for EONIA is the same as for Euribor.

EONIA was reported on an ACT/360 day count convention and displayed to three decimal places.

It's worth noting that "overnight" means from one TARGET day to the next.

EONIA reference rates were calculated by the European Central Bank, based on all overnight interbank assets created before the close of RTGS systems at 6pm CET.

EONIA was published through GRSS (Global Rate Set Systems) every day before 7pm CET, and can be found under the ISIN identifier EU0009659945.

EONIA was replaced by the Euro Short-Term Rate (€STR), published by the ECB since 2nd of October 2019.

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