Interview

'Under the bonnet, this is bigger than the introduction of the euro’

Marjolein de Jong-Knol is working to ensure a fair IBOR transition

Interview

‘Under the bonnet, this is bigger than the introduction of the euro’

Marjolein de Jong-Knol is working to ensure a fair IBOR transition

Marjolein de Jong-Knol represents the chair (ING) of the ‘euro risk-free rates’ working group. This group involves 81 market parties, under the supervision of the European Central Bank (ECB), the European Commission (EC) and the European Securities and Markets Authority (ESMA), working on recommendations for the transition to new European reference interest rates.

The working group’s main task is to find a replacement for EONIA and an alternative for Euribor if there is a danger this will disappear. 'We are looking at an extremely complicated issue with potentially material social impact.’

The working group was recently able to celebrate its first big success, as De Jong-Knol saw €STR quoted on Bloomberg screens for the first time at 8 am on 2 October. This is a new reference interest rate composed by the ECB that will replace EONIA over a 2-year transition period.

Problematische schuldenlast

Confidence

‘The formation of €STR was crucial. We actually celebrated the birth in the traditional Dutch way by eating rusks with aniseed! But we still have a long way to go. The transition from EONIA to €STR mainly affects professional parties, who can be expected to make good preparations. The next step is to find a good alternative to Euribor, which is much more used in the retail market and in Europe forms the basis for many mortgage contracts. If this does not happen properly and in time, it could rapidly affect confidence in the financial sector. And increasing confidence is of course our motive for introducing fairer and more robust reference interest rates.'

Privately, people frequently say that the transition to new reference interest rates is more of an issue than Brexit, and De Jong-Knol is pleased to agree. 'This is not the case for the public at large of course, but under the bonnet of the financial sector this is very significant, more so for instance than the introduction of the euro. It also has to be effected fairly. This is what makes our job so exciting. Our recommendations are not legally binding, so they need to be broadly supported.’

'This is not a time to sit on one’s hands'

Oil slick

De Jong-Knol emphasises that the sector itself is also engaged. 'This is not a time to sit on one’s hands. Now that €STR has been introduced, market parties that use EONIA really have to work on amending their contracts and systems in time, but also review their financial accounting and risk management processes. Fortunately, we are seeing more and more smaller parties waking up, and awareness of the issue facing us is spreading like an oil slick.’

De Jong-Knol also sees a role for supervision. 'Financial institutions have to inform their customers of the potential consequences in good time. This is part of their duty of care, and it needs to be closely monitored by the supervisory authorities. The supervisors can also help by making it clear to the market that we are really on the way towards a better world. At European level, there is support from the ECB, ESMA and the EC. I think this is remarkable. The attention to this in the Trend Monitor is also welcome, and very important for greater awareness at local level in the Netherlands.’

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