An EU benchmark used to set interest rates in trillions of euros of financial contracts needs to disappear by the end of 2021, with the phaseout to have three stages, a working group backed by the European Central Bank working group said on May 15.
In use since 1999, the Eonia overnight lending reference rate has been deemed unduly focused on banks, not representative of borrowing across the euro currency area, and unlikely to pass muster under new laws passed in the wake of multiple rate-fixing scandals.
Those cracks in the system were so deep they could not merely be filled in, the administrator for Eonia concluded last year. Yet abandoning the rate, which is due to happen on Dec. 31, 2021, comes with its own challenges.
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