What Is the Euro Interbank Offer Rate (Euribor)?

Euribor, or the Euro Interbank Offer Rate, is a reference rate that is constructed from the average interest rate at which eurozone banks offer unsecured short-term lending on the inter-bank market. The maturities on loans used to calculate Euribor often range from one week to one year.

This is the benchmark rate with which banks lend or borrow excess reserves from one another over short periods of time, from one week to 12 months. These short-term loans are often structured as repurchase agreements (repos) and are intended to maintain bank liquidity and to make sure that excess cash is able to generate an interest return rather than sit idle.

Key Takeaways

  • Euribor is an overnight interbank rate comprised of the average interest rates from a panel of large European banks that are used for lending to one another in euros.
  • Euribor has various maturities in which each maturity has its own interest rate.
  • Euribor is calculated by a benchmark administrator called Global Rate Set Systems Ltd. and offered by the European Money Markets Institute (EMMI).

Understanding the Euro Interbank Offer Rate (Euribor)

The Euro Interbank Offer Rate (Euribor) in fact refers to a set of eight money market rates corresponding to different maturities: the one-week, two-week, one-month, two-month, three-month, six-month, nine-month, and twelve-month rates. These rates, which are updated daily, 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 LIBOR in Britain and the United States.

Who Contributes to the Euribor Rate?

There are 20 panel banks that contribute to Euribor. These are the financial institutions that handle the largest volume of eurozone money market transactions. As of 2018, these panel banks include:

  • Belfius (Belgium)
  • BNP Paribas (France)
  • HSBC France
  • Natixis (France)
  • Crédit Agricole (France)
  • Société Générale (France)
  • Deutsche Bank (Germany)
  • DZ Bank (Germany)
  • National Bank of Greece
  • Intesa Sanpaolo (Italy)
  • Monte dei Paschi di Siena (Italy)
  • UniCredit (Italy)
  • Banque et Caisse d'Épargne de l'État (Luxembourg)
  • ING Bank (Netherlands)
  • Caixa Geral De Depósitos (Portugal)
  • Banco Bilbao Vizcaya Argentaria (Spain)
  • Banco Santander (Spain)
  • CECABANK (Spain)
  • CaixaBank (Spain)
  • Barclays (Britain)

The Difference Between Euribor and Eonia

Eonia, or the Euro Overnight Index Average, is also a daily reference rate that expresses the weighted average of unsecured overnight interbank lending in the European Union and the European Free Trade Association (EFTA). It is calculated by the European Central Bank (ECB) based on the loans made by 28 panel banks.

Eonia is similar to Euribor as a rate used in European interbank lending. Both benchmarks are offered by the European Money Markets Institute (EMMI). The main difference between Eonia and Euribor is the maturities of the loans they are based on. Eonia is an overnight rate, while Euribor is actually eight different rates based on loans with maturities varying from one week to 12 months.

The panel banks that contribute to the rates are also different: only 20 banks contribute to Euribor, instead of 28. Finally, Euribor is calculated by Global Rate Set Systems Ltd., not the ECB.