Benchmark reforms

If in any of your products reference is made to interest rate benchmarks such as EURIBOR, LIBOR and/or EONIA, this applies to you.

Benchmarks are currently being reformed or replaced globally. With the aim of better guaranteeing the reliability, accuracy and integrity of these interest benchmarks. This means that interest rate benchmarks such as the Euro Interbank Offered Rate (EURIBOR), Euro Overnight Index Average (EONIA) and the London Interbank Offered Rate (LIBOR) are being replaced or adjusted.

Does this affect you?

The reforms may impact you if your financial products such as loans, mortgages, structured products or derivatives refer to interest rate benchmarks such as EURIBOR, EONIA or LIBOR. We will contact you if this is the case and if any actions have to be taken. Below we provide you with general information on the benchmark reforms.

What are interest rate benchmarks?

Interest rate benchmarks are indexes that are globally used as the basis for calculating prices under and values of financial agreements. For example, ABN AMRO uses these for calculating interest payments on outstanding loans or cash collateral balances.

Why the reforms?

Interest rate benchmarks that are so-called Interbank Offered Rates (IBORs) are determined by a relatively small amount of banks that report rates based on non-binding quotes. In addition, there has been a significant decline of transactions in the interbank market. This has resulted in a diminished confidence in the reliability, robustness and long-term stability of those interest rate benchmarks. Consequently, international regulators have initiated global reforms to ensure benchmarks are robust, reliable and fit for purpose. ABN AMRO supports these reforms and is participating in industry-body working groups that facilitate a smooth transition.

Benchmark Regulation

On 1 January 2018, European legislation has been introduced in the form of the Benchmark Regulation. This European regulation sets forth criteria that must be met to ensure that benchmarks are determined by robust methodologies and reliable data. If benchmarks do not comply with these criteria they need to be reformed to comply with the standards, or they must be discontinued and replaced by alternative benchmarks that do adhere to these standards. The Authority for Dutch Financial Markets (Autoriteit Financiële Markten) supervises ABN AMRO's implementation of the Benchmark Regulation. 

The Benchmark Regulation also stipulates that banks must have a robust written plan establishing a course of action should a benchmark materially change or cease to be provided. This plan is called a "Fallback Plan". In its Fallback Plan, ABN AMRO sets out its internal procedures that need to be followed and actions that need to be taken in case a benchmark materially changes or ceases to be available. The Fallback Plan ensures that ABN AMRO investigates possible alternative benchmarks, follows market practice as much as possible and performs an impact assessment when designating an alternative benchmark.

How do the reforms affect EURIBOR, EONIA and LIBOR?

Benchmarks such as EURIBOR, EONIA and LIBOR are impacted by the reforms. As a result thereof, the manner in which EURIBOR is determined has been changed. Therefore, EURIBOR complies with the Benchmark Regulation and at this moment, EURIBOR is not scheduled to be discontinued. ABN AMRO can still use this benchmark. EONIA ceases to exist and will at the end of 2021 be replaced with the European Short-Term Rate (€STR), an overnight rate calculated and published by the European Central Bank. Also LIBOR is likely be discontinued at the end of 2021. Below is an overview of the recommended alternatives for commonly used interest rate benchmarks.

€STR and SOFR discounting switch

Currently, ABN AMRO is contacting clients on the €STR and SOFR discounting switch.

Do you have any questions and/or require any further information?

If you have any questions about the contents of this website, please do not hesitate to call or email your contact person within the bank. Alternatively please email ibor-queries@nl.abnamro.com.

More information on the benchmark reforms can be found on the Dutch Banking Association (Nederlandse Vereniging van Banken, NVB) website, and the European Central Bank website (where the complete reports and recommendations of the ‘Working Group on Euro risk free rates’ can be found). If you would like to read more about the reforms and the changes, please see useful links below.