Euribor

Euribor (Euro Interbank Offered Rate) is the euro money market benchmark rate published by the European Money Markets Institute (EMMI). It measures the rate at which credit institutions obtain euro funding in the unsecured money market. EMMI publishes it on each TARGET2 opening day at 11:00 Central European Time, or shortly after, for five tenors: one week, one month, three months, six months and twelve months. A panel of 20 banks contributes to its calculation. The hybrid methodology, revised in February 2024, first uses each panel bank’s eligible transactions of at least €10m and, failing that, interpolation techniques and transactions from earlier dates. The European Commission recognised Euribor as a critical benchmark in 2016. In a floating rate corporate loan, Euribor forms the variable part of the rate. The agreement selects one of the published tenors, for example three months, and sets the rate for each interest period at the Euribor observed at the start of the period plus the margin. A change in Euribor alters the company’s interest charge without any renegotiation of the agreement. For this reason, the loan documentation provides where relevant for an obligation to hedge part of the outstanding amount, a floor clause and a benchmark replacement clause in case its publication ceases.

A company borrows €150m at three-month Euribor plus a margin of 4.50%. If three-month Euribor stands at 2.00% at the start of a quarter, the rate for the period reaches 6.50% and the interest for the quarter about €2.44m (€150m × 6.50% × 90/360). A rise in Euribor of 0.50 percentage points in the following quarter brings the quarterly charge to about €2.63m.

• The Euribor tenor selected (one, three or six months) and the fixing date of each period
• Whether there is a floor and at what level
• The obligation to hedge part of the outstanding amount with a swap or a cap
• The benchmark replacement clause if its publication ceases