Replacement EURIBOR-Reference Rates – Follow Up
18 February 2019
The working group on replacing EURIBOR reference rates recently published “Guiding principles for fallback provisions in new contracts for euro-denominated cash products” in order to support the transition to risk-free reference rates. The paper serves as a recommendation and provides an overview of legal frameworks and market practices for cash products, such as mortgages, loans and bonds, referencing EURIBOR and EONIA and a set of guiding principles promoting effective fallback provisions in new contracts for euro-denominated cash products. In the course of 2019, the working group intends to recommend more detailed fallback language for legacy and new euro-denominated contracts.
In this paper the working group points out that in Europe under the Benchmarks Regulation supervised entities need to produce and maintain robust written plans setting out the actions that they would take in the event that a benchmark materially changes or ceases to be provided.
The working group further stresses the importance of such fallback provisions: „Continuing to enter into new contracts referencing EONIA or EURIBOR without more robust fallback provisions may increase the risk in the financial system.”
You can download the document here
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