On February 2, 2018, the administrator of the Euro OverNight Index Average, the European Money Markets Institute, announced its decision not to pursue a thorough review of the EONIA benchmark.
EONIA represents the weighted average of all overnight unsecured lending transactions in the interbank market undertaken in the European Union and European Free Trade Association countries. EMMI, which also administers Euribor, had been engaged in a review program since December 2015 with the objective of enhancing EONIA's governance and operation to align it with the requirements of the EU Benchmarks Regulation, which took effect on January 1, 2018.
Under the Benchmarks Regulation, index providers must apply for authorization or registration by January 1, 2020. Following its analysis of unsecured interbank money market activity undertaken as part of the EONIA review, EMMI has concluded that, should market conditions and dynamics remain unchanged and EONIA's definition and calculation methodology remain in its current format, EONIA's compliance with the Benchmarks Regulation by January 2020 "cannot be warranted". EONIA may be used as a reference rate, under the transitional provisions of the Benchmarks Regulation, until December 31, 2019 and daily publication of the rate will continue "as is." EMMI is also open to assessing whether methodological parameters could be adapted, if deemed necessary, to make the benchmark more robust. The Benchmarks Regulation sets out specific conditions that must be met after December 31, 2019, for the provision and use of EONIA in existing contracts.
The EMMI publication is available at: https://www.emmi-benchmarks.eu/assets/files/D0030D-2018-Eonia review state of play.pdf.
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