In August 2018, the European Central Bank ("ECB") published the results of the first consultation by the working group on euro risk-free rates regarding the assessment of candidate euro risk-free rates ("Consultation"). The Consultation received responses from 66 market participants, which provided an adequate geographical representation.

The outcome of the Consultation can be summarised as follows:

  • respondents generally agreed with the "working group’s analysis of unsecured candidates for the euro risk-free rate" from an analytical point of view, selection criteria and respective results;
  • the majority of the participants in the Consultation agreed that the proposed ECB rate ESTHER is the most appropriate euro risk-free rate to use moving forward, considering:
    • its unsecured nature;
    • its administration by the ECB;
    • its calculation methodology; and
    • its low volatility.

During the Consultation, respondents made a number of recommendations about ESTER, including:

  • that the start of publication be earlier (from its current date of October 2019)
  • that daily publication be earlier (from the current time of not later than 09:00 CET on the next TARGET2 business day); and
  • that the coverage of reporting banks be expanded (currently there are 52 MMSR banks).

Additional information on the topics above is expected to be discussed during the next meeting of the working group, which is to be held on 13 September 2018. The full text of the Consultation can be accessed here.