Libor: Market welcomes two-year delay to benchmark reform

Abstract

Ester, or the euro short-term rate, was selected as a replacement for existing benchmarks Euribor and Eonia by a private sector working group in September 2018. The publication of Ester would enable and encourage market participants to make the transition from ibors to an alternative reference rate (ARR), as well as provide them with as much detailed information as possible to minimise market risk. The interest rate payable by a borrower over a period cannot be known at the beginning of an interest period but only at the end, so a term structure of short term rates needs to be created and accepted by all parties to derivatives transactions.