Spain 
Italy 
Greece 
ESTER, the New Version of Euribor, Will Come into Force in 2019
23 May 2018
The ECB, led by Mario Draghi, has announced a new solution based on a hybrid model.
While it is still in the test phase, a new interbank interest rate – which aims to complement Euribor and Eonia beginning at the end of 2019 – already has a name. The European Central Bank (ECB) has already announced that it will be called ESTER (an acronym for “euro short-term rate”). The new rate will be a hybrid solution after banks rejected a model based purely on actual transactions. The Euribor rate serves as the benchmark for the vast majority of housing loan agreements in Portugal.
ESTER, which has been under testing since the beginning of this month, will be priced based on transactions taking place in the Eurozone interbank market and also on estimates provided by the banks, according to Reuters.
In practice, the new methodology will be composed of a three-tiered scheme that takes regulatory requirements into account, putting an end to the transition to Euribor-Plus (a fully transaction-based system).
The European authorities aim to create a benchmark interest rate that is less susceptible to outside management – Euribor has been caught up in a number of financial fraud scandals – and to provide transparent information on the real functioning of the market.
Public consultation at the end of this year
On May 2, the European Monetary Markets Institute (EMMI) announced that the testing phase of the hybrid Euribor methodology had begun. The tests will be conducted over three months, ending on July 31. Throughout this period, analyses will be conducted through various scenarios and all methodological parameters will be evaluated.
After these tests, a new public consultation will be conducted in the third quarter. The rate is expected to be officially released in the fourth quarter of 2019. A transitional period will be set before that.
Original Story: Idealista
Photo: Gtres
Translation: Richard Turner