Loan Beneficiaries to Choose Replacement for LIBOR and EONIA Rates

Due to the cancellation of the interest rates LIBOR (London Interbank Offered Rate) and EONIA (Euro Overnight Index Average), the National Bank of Serbia (NBS) has issued a recommendation to banks with models of arranging the relations with loan beneficiaries regarding the calculation of interests.

Instead of interests calculated based on LIBOR, banks are recommended to offer to loan beneficiaries interests calculated based on SARON (Swiss Average Rate Overnight).

As for EONIA, the recommendation is to use €STR (Euro Short-Term Rate) instead.

The NBS recommends to banks to offer to loan beneficiaries as an additional option the signing of an annex by which the interests would be fixed until the loan is repaid based on the last published values of LIBOR and EONIA.

For agreements on deposits with a changeable interest rate based on LIBOR or EONIA, banks are recommended to implement SARON and €STR and to terminate the agreement if this is refused.

The recommendation reminds that, in regular harmonization of interest rates, the beneficiary must be notified of the value of the interest rate before it is implemented.

The NBS says that banks must notify loan beneficiaries of this in a written form, in a manner that is easy to understand, and, if necessary, to also provide further explanation.

Narodna banka Srbije Beograd

National Bank of Serbia

NBS

cancellation of interest rates

LIBOR

London Interbank Offered Rate

EONIA

Euro Overnight Index Average

SARON

Swiss Average Rate Overnight

interest rates

interest rate calculation

Euro Short Term Rate