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What Is the Euro Interbank Offered Rate (Euribor)?
The Euro Interbank Offered Rate (Euribor) is a reference rate constructed from the average interest rate at which eurozone banks offer unsecured short-term lending on the inter-bank market. Loan maturities used to calculate Euribor often range from one week to one year. Euribor is the benchmark rate with which banks lend or borrow excess reserves from one another over no more than 12 months. Often structured as repurchase agreements (repos), these loans help maintain bank liquidity and ensure that excess cash can generate an interest return rather than sit idle.
Key Takeaways
- Euribor is a benchmark rate based on the average interest rates for short-term loans between eurozone banks.
- It is updated daily and includes five maturities: one week, one month, three months, six months, and 12 months.
- Euribor influences euro-denominated financial products like mortgages, savings accounts, and derivatives.
- Unlike Euribor, €STR is a risk-free rate based on overnight borrowing information without significant bank credit risk.
How Euribor Impacts the European Financial System
The Euro Interbank Offered Rate is a set of five money market rates corresponding to different maturities: the one-week, one-month, three-month, six-month, and 12-month rates. These rates are updated daily and represent the average interest rate that eurozone banks charge each other for uncollateralized loans.
Euribor rates are an important benchmark for a range of euro-denominated financial products, including mortgages, savings accounts, car loans, and various derivatives securities. Euribor’s role in the eurozone is analogous to SOFR, which replaced LIBOR in 2023, in Britain and the United States.
The Banks Behind the Euribor Rates
There are 19 panel banks that contribute to Euribor. These are the financial institutions that handle the largest volume of eurozone money market transactions. As of August 2024, these panel banks include:
| Bank | Country |
|---|---|
| Raiffeisen Bank International AG | Austria |
| Belfius | Belgium |
| Barclays | United Kingdom |
| BNP Paribas | France |
| Crédit Agricole s.a. | France |
| HSBC Continental Europe | France |
| Natixis | France |
| Société Générale | France |
| Deutsche Bank | Germany |
| DZ Bank | Germany |
| Intesa Sanpaolo | Italy |
| UniCredit | Italy |
| Banque et Caisse d’Épargne de l’État | Luxembour |
| ING Bank | Netherlands |
| Caixa Geral De Depósitos | Portugal |
| Banco Bilbao Vizcaya Argentaria | Spain |
| Banco Santander | Spain |
| CECABANK | Spain |
| CaixaBank | Spain |
Comparing Euribor and €STR: Key Differences
While both Euribor and the Euro Short-Term Rate (€STR) are interest rates available in euros, there are some differences. Euribor indicates the rate at which European banks can borrow money in euros from one another. €SRT, on the other hand, is a backward-looking rate based on overnight borrowing information of European banks at market rates.
Euribor is a forward-looking rate of five different maturities, ranging from one week to 12 months. Additionally, €SRT is considered to be a risk-free rate because it does not include significant term risk or bank credit risk.
What Is an Interbank Lending Rate?
An interbank lending rate is the interest rate at which banks in a country or economic region lend to one another on a short-term basis. Banks tend to lend to one another to maintain liquidity and meet reserve requirements to ensure the proper health of an economic system. Interbank lending rates can affect other interest rates in a nation or economic region.
How Many Euribor Interest Rates Are There?
The Euribor rate is provided in five different maturities. These are rates for one week, one month, three months, six months, and 12 months.
What Was LIBOR?
LIBOR was the London Interbank Offered Rate which was an interest rate benchmark for short-term loans between global banks. This rate was the globally accepted rate for lending between banks until it was phased out in 2023. It was replaced by the Secured Overnight Financing Rate (SOFR).
Is the Euro Overnight Index Average Still Used?
Euro Overnight Index Average (EONIA) was the average interest rate at which European banks lent to one another in euros. EONIA was discontinued in 2022 and replaced with the Euro Short-Term Rate (€STR).
The Bottom Line
The Euro Interbank Offered Rate (Euribor) is a benchmark rate that indicates the average interest rate at which banks in the eurozone lend to each other on a short-term basis. The benchmark includes five rates with maturities ranging from one week to one year.
The Euribor rate influences various financial products, such as mortgages and savings accounts. It is based on contributions from 19 influential European banks, thereby reflecting the liquidity and financial condition of the eurozone.
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