EURIBOR is an interest rate benchmark for the eurozone, standing for Euro Interbank Offered Rate. It is calculated using the average rates that eurozone banks offer each other on unsecured short-term loans of various maturities.
EURIBOR represents the rate at which banks will lend capital to each other for short periods (short in this instance meaning less than one year). The rates quoted by various different banks are averaged together to make the benchmark, which is quoted daily.
Like other IBORs, EURIBOR rates are used in various financial products – including OTC derivatives.
What is the EURIBOR replacement?
The EURIBOR replacement is the Euro Short-Term Rate (ESTR). The European Central Bank began publishing ESTR in October 2019, with the intention of transitioning away from EURIBOR.
The reason for the shift is that EURIBOR is not based on hard data. Instead, it is a survey of various leading banks. This means that EURIBOR (and other IBORs) no longer meet the EU’s benchmark regulations.
ESTR – which is calculated using transaction data from exchanges – does.