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IBRD Adopts Euribor as Reference Rate for New Euro-Denominated Loans

 

 

WASHINGTON, DC, July 30, 2010 — The Board of Executive Directors of the Bank approved the adoption of Euribor, the Euro Interbank Offered Rate, to replace EUR LIBOR, the Euro-denominated London Interbank Offered Rate, as the reference rate for new IBRD loans denominated in Euros.

Over the past decade since the introduction of the Euro, Euribor has largely replaced EUR LIBOR in financial markets as the standard and preferred reference rate for Euro-denominated contracts. Today, Euribor is used by most major institutions as the reference rate, providing the basis for many of the world's most liquid and active interest rate markets. EUR LIBOR remains in use in the market mainly for continuity purposes.

Continued use of EUR LIBOR could expose IBRD and its borrowers to higher costs as it becomes increasingly difficult to conduct transactions using EUR LIBOR as the market reference. Moving to Euribor allows IBRD to access more cost effective funding for Euro-denominated loans.

Impact on New and Existing Loans

All new Euro-denominated loans for which the invitation to negotiate is issued on or after July 31, 2010 will now have Euribor as the reference rate. Borrowers with loans that have been negotiated as of July 31, 2010, but not yet signed, may request a change of the applicable General Conditions to incorporate Euribor as the reference rate.  Existing Euro-denominated loans will retain the EUR LIBOR reference rate, but borrowers have the option to switch to Euribor by requesting an amendment to the loan agreement.

For more information about this change, please send us an email at FAB@worldbank.org.