Euro Overnight Index Average (Eonia)

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Euro Overnight Index Average (EONIA)

Overview

The Euro Overnight Index Average (EONIA) was the benchmark overnight interest rate for euro-denominated unsecured lending between European banks. It expressed the average rate for one-day interbank loans and served as a reference for short-term funding and some financial contracts. Regulatory reforms led to EONIA being replaced by the Euro Short-Term Rate (€STR) in January 2022.

How EONIA worked

  • EONIA was published daily by the European Central Bank (ECB).
  • It represented a weighted average of overnight unsecured lending rates submitted by a panel of banks (28 panel banks).
  • Banks with short-term cash shortages borrowed overnight from banks with surpluses; the rate at which these loans occurred determined the overnight interbank rate.
  • EONIA reflected the cost of unsecured, wholesale overnight funding among established European banks.

EONIA vs. EURIBOR

  • EURIBOR (Euro Interbank Offered Rate) is also an interbank benchmark, but unlike EONIA it includes multiple maturities (from one week up to 12 months). Each maturity has its own rate.
  • EURIBOR historically used submissions from a different panel (reported as 19 banks at the time of comparison) and is administered separately from EONIA.
  • In short: EONIA = an overnight unsecured rate; EURIBOR = a set of term rates across several maturities used widely for mortgages, loans, and other financial products.

Why EONIA was replaced

  • After industry-wide scrutiny of quote-based benchmarks and cases of manipulation, regulators sought a more robust, transaction‑based reference rate.
  • The working groups and regulators recommended a market-wide, transaction-based rate with broader coverage to improve reliability and reduce susceptibility to manipulation.

€STR (Euro Short-Term Rate)

  • €STR (also referred to in some sources as ESTER) is the euro-denominated overnight rate that replaced EONIA.
  • €STR is based on a broader set of wholesale transactions across banks and financial institutions, making it more transaction-driven and representative of actual market activity.
  • The transition to €STR aimed to improve transparency, coverage, and resilience of the euro short-term benchmark.

Practical implications

  • Contracts and financial instruments referencing EONIA were transitioned to €STR or updated to reference alternative fallback provisions.
  • Market participants and infrastructure (pricing models, legacy contracts, trading systems) needed to adjust to the new reference rate and, where necessary, apply spread adjustments to align economic outcomes.

Key takeaways

  • EONIA was the overnight unsecured interbank lending rate for the euro, calculated from submissions by a panel of banks.
  • EURIBOR differs by offering multiple maturities and serving as a common benchmark for many retail and wholesale products.
  • Regulatory reforms replaced EONIA with €STR in 2022 to create a more robust, transaction-based overnight benchmark with broader market coverage.