EURIBOR – What is it?

The Euro Interbank Offer Rate, known in short as Euribor, is the rate at which Eurozone banks offer loans to one another. The Euribor interest rates are daily reference rates, published at 11 o’clock Central European Time. The agreements made on borrowed funds, moreover, can have eight different maturity periods, in the range of one week to a year.

The Euribor rates play a significant role in the European money market, because various financial products, such as interest rate swaps, interest rate futures, and even saving accounts and mortgages, use them as their base reference rate. In this capacity, they the Euribor makes up some of the most liquid and active interest-rate markets around the world, and for that reason many professional investors and binary options traders monitor these rates closely every day.

How Is Euribor Calculated?

There are certain criteria for the banks that input quotes for the Euribor that ensure an adequate reflection of the diversity of the euro market and an efficient representative benchmark. The main panel consists of the banks with the largest volume of business in the euro zone money market. This panel of representative banks is responsible for providing daily quotes rounded to three decimal places that they believe represent the rates of interbank term deposits for each maturity period. The data must be handed in no later than 10:45 a.m. CET on every working day of the Trans-European Automated Real-Time Gross-Settlement Express Transfer (TARGET) system.

Once all the information is in, Reuters process the Euribor calculations and publishes the reference rates instantly on Reuters pages 248-249. The rate published is a rounded, truncated mean of all the submitted quote rates. The mean is derived by eliminating the highest and lowest 15 percent of quotes and averaging out the remainders to three decimal points. Once the official rate has been derived, it is also made available to all of Reuters’ subscribers and other vendors of data.