Guideline (EU) 2021/565 of the European Central Bank of 17 March 2021 amending Guideline (EU) 2019/1265 on the euro short-term rate (€STR) (ECB/2021/10)

GUIDELINE (EU) 2021/565 OF THE EUROPEAN CENTRAL BANK of 17 March 2021 amending Guideline (EU) 2019/1265 on the euro short-term rate (€STR) (ECB/2021/10) THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 127(2) and (5) thereof, Having regard to the Statute of the European System of Central Banks and of the European Central Bank, and in particular Article 12.1 and 14.3 thereof, Whereas: (1) Regulation (EU) 2016/1011 of the European Parliament and of the Council (1) necessitates the adoption of robust fallback provisions in a large number of financial contracts and instruments. In the absence of such fallback provisions, the possible discontinuation in the future of a critical benchmark, such as Euribor, may have serious repercussions for the functioning of markets and, as a result, for the implementation of monetary policy. These repercussions could include the inability of market participants to value balance sheet positions, the frustration of a significant number of contracts, and disruption in certain markets – including lending markets – which are important for the Eurosystem’s monetary policy. Overnight rates compounded in arrears are one viable fallback option that is recommended by the Financial Stability Board and market participants support the introduction of such rates. The publication by the European Central Bank (ECB) of compounded rates based on...