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The Mortgage Credit Directive (MCD) requires creditors to use, under certain circumstances, a benchmark rate specified by the European Banking Authority (EBA) for the illustrative examples in the European Standardised Information Sheet (ESIS) for variable rate mortgages.
The formula developed by the EBA includes an underlying rate that is specific to each Member State, namely the European Central Bank (ECB) rate for Eurozone countries and the national central bank rate for non-Eurozone countries.
As a result, the formula will create an EBA benchmark rate that is bespoke to each Member State, and remains up to date over time. However, to ensure that consumers receive the most appropriate example, the EBA rate only applies where no national rate has been set.
The EBA's proposal was subject to a six-week consultation period between October and November 2015. The EBA received four responses, a summary of which and the EBA's feedback to those responses, is included in the Report.