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The EONIA legal action plan addresses two events:
The working group recommends that market participants consider replacing EONIA with €STR as a reference rate for all products and contracts and that they make all operational adjustments necessary for using €STR as their standard benchmark as soon as possible.
In particular, it is recommended that new contracts referencing EONIA include robust fallback provisions and an acknowledgement that references to EONIA will be understood to be references to EONIA as modified after the change to its methodology on 2 October 2019. For legacy contracts referencing EONIA and maturing after December 2021, market participants should consider replacing EONIA as a primary rate as soon as possible or embedding robust fallback clauses referencing the recommended fallback rate for EONIA.
Additionally, the working group intends to recommend €STR plus a spread (the one-off computation of the difference between €STR and EONIA in the context of the proposed recalibrated EONIA methodology) as the EONIA fallback rate.
The EONIA legal action plan covers legacy and new contracts referencing EONIA in different asset classes (derivative transactions, collateral agreements and cash products) and was developed by the working group in close cooperation with the relevant trade associations and a group of law firms that are members of the subgroup on contractual robustness.
This consultation follows the publication of a set of general guiding principles for fallback provisions in new contracts for euro-denominated cash products and the recommendations on the transition path from EONIA to €STR, which the working group issued in January and March 2019 respectively.
Responses to the consultation are welcomed by 17:00 CET on 12 June 2019.