Some European Union lawmakers are searching for a way to give banks more time to replace the existing benchmark -- the euro overnight index average, or Eonia -- with a new rate produced by the European Central Bank.
Time is short. The use of Eonia will be restricted at the start of 2020 because it doesn’t meet EU standards, and the ECB may not start publishing its replacement -- the euro short-term rate, or Ester -- until October 2019. That short window makes an extension of Eonia’s life span essential, according to Caroline Nagtegaal, a Dutch lawmaker in the European Parliament who has proposed a legislative fix to give banks more time to make the switch.
“A longer transitional period of two years for critical benchmarks is appropriate” to allow for a smooth transition and “minimal market disruptions,” Nagtegaal said in a parliamentary hearing.
The challenge for lawmakers is that there’s not much time left to push bills through before the European Parliament breaks in April for elections the following month. The European Commission, which initiates all EU legislation, has said there’s currently no proposal on the table to open up the bloc’s benchmarks law and extend the use of Eonia.
That means the delay will have to be attached to a bill already in the pipeline. Both the parliament and member states are pursuing two main options. Nagtegaal has attached a rider on a two-year extension to an overhaul of the EU’s regulatory agencies. On Thursday, she said she’d attach the same amendment to a reform of EU low-carbon benchmarks.
A proposal has been made to EU member states, which also must approve legislation, for three extra years, according to people familiar with the matter.
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