The ECB’s Governing Council decided that the new ECB unsecured overnight rate would be called ESTER (euro short-term rate). This interest rate, which will be produced before 2020, will complement existing benchmark rates produced by the private sector and serve as a backstop reference rate.
On 3 May 2018 the Governing Council adopted Guideline ECB/2018/14 on the Eurosystem’s provision of reserve management services in euro to central banks and countries located outside the euro area and to international organizations. The revisions introduced by the Guideline aim to implement various operational changes, clarify some aspects in relation to the services and address some suggestions received from the customers of the Eurosystem reserve management services (ERMS).
In May, The ECB also announced a swathe of decisions on financial stability and supervision, market infrastructure and payments and banking supervision.
The ECB also published a summary of responses to its second public consultation on
developing a euro unsecured overnight interest rate. The main messages from the financial sector may be summarized as follows:
1. A large majority of respondents agreed that a €1 million threshold would
adequately reduce the administrative burden resulting from the consideration of
all transactions while ensuring an effective representativeness of the future
ECB reference rate.
2. Respondents broadly agreed with the proposed methodology of a volume-weighted
mean with trimming though expressed some reservation on the proposed 25% trimming level, with a small majority expressing a clear preference for a trimming at the 10% level based on a larger and more diversified volume of transactions for the calculation of the rate.
3. Respondents largely approved of the proposed criteria-based data sufficiency
4. Respondents agreed with the proposed criteria for moving to a contingency
5. Approximately half of respondents recommended enhancements to the data
sufficiency policy, the most frequent suggestion being an additional criterion to
ensure adequate country representativeness.
6. A majority of respondents agreed with the proposed calculation methodology for
the contingency rate but requested clarification on the application of the
contingency rate for more than two days in a row.
7. Respondents viewed a rate expressed to three decimal places as ensuring
precise information, as well as continuity and consistency in market practices.
8. Respondents generally welcomed a high degree of transparency, although they
also raised concerns about confidentiality and market manipulation related, in
particular, to the publication of the “percentage of volumes reported by the five
9. Respondents saw merit in republishing a rate only if serious error resulted in a
significant difference between the published rate and the recalculated rate.
10. Respondents viewed the envisaged publication of daily rate and volume data
during the preparatory phase as sufficient in terms of scope and planned start
11. High-level features or issues that respondents viewed as important to highlight
fall into two broad categories: (i) transition issues and market preparation; and
(ii) further methodological considerations.