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- Rates
- Panel Banks
- Methodology
- Governance
- Transparency
- Reforms
- Methodology
Hybrid Methodology
To ensure Euribor’s robustness and representativeness, and comply with the European regulation on financial benchmarks and interest rate benchmarks (Benchmarks Regulation of the European Union or BMR), a Hybrid Methodology has been developed and implemented, allowing Euribor® to remain fit-for-purpose in any market circumstances, and always compliant with the latest regulatory requirements and industry recommendations.
With the Hybrid Methodology, the contributions to the determination of Euribor® made by the Panel Banks follow a three-level hierarchical approach.
Waterfall methodology
Level 1 consists of contributions based solely on eligible transactions in the unsecured euro money market, with a minimal notional amount of 10 million euros – a criterion which has been amended in 2021 as the amount stood at 20 million previously. The contribution rate of each Panel Bank is calculated using the volume weighted average rate of the eligible transactions by tenor.
Where a Panel Bank has insufficient Eligible Transactions for a Level 1 contribution to be calculated for a given tenor, but nonetheless has had transactions in nearby maturities or from prior dates the Panel Bank’s contribution can be calculated using a further range of calculation techniques in order to make a Level 2 contribution for that tenor. EMMI permits three Level 2 contribution techniques. These techniques should be employed progressively and in the order specified below:
- Level 2.1: adjusted linear interpolation from adjacent Defined Tenors;
- Level 2.2: Transactions at non-Defined Tenors;
- Level 2.3: Eligible contributions from prior dates with the Market Adjustment Factor.
Annual review
The regulation of the European Union on financial benchmarks (BMR) requires benchmarks administrators to periodically review their benchmarks’ methodologies.
The European Money Markets Institute performs such review of the Hybrid Methodology for Euribor® annually with a twofold objective:
- Confirming that the benchmark remains robust, resilient, and representative of its underlying market
- Identifying any potential for further beneficial recalibrations
| Version | Date applicable | Summary of Changes |
|---|---|---|
| D0016A-2019 | 31/01/2019 | Initial version |
| D0016B-2019 | 24/03/2021 |
Clarified the Euribor Underlying Interest to include former EU
|
| D0016C-2019 | 27/06/2022 |
Increased the maturity window of 12-months tenor by 15
|
Evolution of Methodology
Initial version
Clarified the Euribor Underlying Interest to include former EU and EFTA countries; Reduced the minimum size threshold eligible transactions from EUR 20 million to EUR 10 million; Included T+3 settlement amongst eligible transactions; Increased the lookback period of usable historical Level 1 contributions by one day; Rolling forward the quarterly Euribor® futures used in Level 2.3 calculations one TARGET day earlier; Replaced references to ‘Steering Committee’ with ‘Oversight Committee’.
Increased the maturity window of 12-months tenor by 15 business days; Replaced the use of previous 5-days Euribor® rates with previous 5-days panel bank’s contribution rates to calculate the SAF used to determine the Level 2.1 ; Replaced the use of the previous day Euribor® rates with the previous day panel bank’s contribution rates to calculate the shift adjustment used to determine the Level 2.2; Qualified Level 2.2. rate as eligible if the original volume of the non-standard maturity trade is higher than EUR 10 million.
Documents
Benchmark Determination Methodology for Euribor®
Euribor Methodology Governance | October 2022
Outcome First Annual Review of Hybrid Methodology for Euribor®
Euribor Methodology | February 2021
Euribor® Benchmark Statement
Euribor Methodology Governance | January 2021
Data Transmission and Validation under the Hybrid Methodology
Euribor Methodology Governance | April 2019