ECB: Summary of responses to the ECB’s second public consultation on developing a euro unsecured overnight interest rate

18 May 2018

The consultation drew considerable interest from the financial sector. 48 market participants – just under two-thirds of them from the banking sector – submitted responses or comments in relation to the consultation document.

The main messages from the financial sector may be summarised as follows:

• A large majority of respondents agreed that a €1 million threshold would adequately reduce the administrative burden resulting from the consideration of all transactions while ensuring an effective representativeness of the future ECB reference rate.
• Respondents broadly agreed with the proposed methodology of a volumeweighted mean with trimming though expressed some reservation on the proposed 25% trimming level, with a small majority expressing a clear preference for a trimming at the 10% level based on a larger and more diversified volume of transactions for the calculation of the rate.
• Respondents largely approved of the proposed criteria-based data sufficiency policy.
• Respondents agreed with the proposed criteria for moving to a contingency procedure.
• Approximately half of respondents recommended enhancements to the data sufficiency policy, the most frequent suggestion being an additional criterion to ensure adequate country representativeness.
• A majority of respondents agreed with the proposed calculation methodology for the contingency rate but requested clarification on the application of the contingency rate for more than two days in a row.
• Respondents viewed a rate expressed to three decimal places as ensuring precise information, as well as continuity and consistency in market practices.
• Respondents generally welcomed a high degree of transparency, although they also raised concerns about confidentiality and market manipulation related, in particular, to the publication of the “percentage of volumes reported by the five largest banks”.
• Respondents saw merit in republishing a rate only if serious error resulted in a significant difference between the published rate and the recalculated rate.
• Respondents viewed the envisaged publication of daily rate and volume data during the preparatory phase as sufficient in terms of scope and planned start date.
• High-level features or issues that respondents viewed as important to highlight fall into two broad categories:
  • transition issues and market preparation; and
  • further methodological considerations.

The ECB will continue to inform market participants on the progress made. The ECB also intends to ensure an effective information flow to provide the financial sector with as much information as possible to prepare for a smooth implementation of and transition to the new rate.

Full summary

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