What Was EONIA (Euro Overnight Index Average)?

EONIA Definition and Purpose

The Euro Overnight Index Average (EONIA) was a benchmark rate that reflected the average interest rate at which European banks lent to one another overnight in euros. It was published by the European Central Bank (ECB) and calculated by the European Money Markets Institute (EMMI). 

EONIA was widely used to value short-term derivatives, build discount curves, and reference overnight lending activity in the eurozone.

EONIA Calculation Concerns

EONIA was based on a panel of European banks reporting the rates at which they lent to other banks on an unsecured, overnight basis. The ECB published the average on each business day.

However, this method had flaws. As activity in unsecured interbank lending declined over the years, the calculation relied more on estimates than real transactions. That raised concerns about transparency and reliability. 

These concerns grew after the LIBOR scandal, when several major banks were found to have manipulated benchmark rates for profit. The incident led to widespread regulatory pressure to overhaul how reference rates were calculated.

Why EONIA Was Phased Out

Regulatory Reform and Benchmark Weaknesses

EONIA’s methodology no longer met the standards set by the EU Benchmark Regulation (BMR). The BMR requires benchmarks to be based on actual, observable market transactions, which EONIA increasingly lacked.

At the same time, regulators were pushing to reduce systemic risk tied to opaque or easily manipulated reference rates. EONIA’s low transaction volume and panel-based estimates made it vulnerable.

EONIA and the Global LIBOR Phase-Out

EONIA’s phase-out didn’t happen in isolation. It was part of a broader global effort to replace interbank offered rates (IBORs), including LIBOR, with risk-free rates (RFRs) that are more robust and transparent. 

These new benchmarks are rooted in real transaction data, making them more reliable and transparent than the estimates that EONIA and LIBOR relied on.

What Replaced EONIA?

The ECB introduced the Euro Short-Term Rate (€STR) as the European Union’s official overnight benchmark interest rate. Unlike EONIA, €STR is based entirely on real, anonymized transactions in the wholesale unsecured overnight market. That makes it more transparent and less prone to manipulation.

EONIA Phase-Out Timeline: Key Dates

June 2019: The ECB published the final methodology for the €STR, confirming it as the eurozone’s new overnight benchmark.

October 2019: €STR was officially launched. At the same time, EONIA was recalibrated as €STR plus 8.5 basis points to help facilitate a smoother transition.

January 3, 2022: EONIA was permanently discontinued. From this date forward, €STR became the sole overnight rate for euro-denominated markets.

Other Benchmark Rate Replacements

Each currency now has its own official replacement rate, selected based on local market activity:

• USD: SOFR – Secured Overnight Financing Rate (based on U.S. Treasury repo transactions)
• GBP: SONIA – Sterling Overnight Index Average
• JPY: TONA – Tokyo Overnight Average Rate
• CHF: SARON – Swiss Average Rate Overnight

EONIA’s retirement fits into this global benchmark reform effort, where all major jurisdictions moved to overnight rates based on observable transactions.

Impacts of the EONIA Transition

The phase-out of EONIA affected a wide range of financial products:

• Derivatives: Contracts that previously referenced EONIA adopted fallback provisions or were renegotiated to use €STR instead.
• Valuation models: Discount curves, especially in collateralized derivatives pricing, had to be updated to reflect €STR inputs.
• Risk and pricing models: Internal systems across banks, asset managers, and clearing houses were modified to account for the new benchmark.

Regulators and industry groups, including the International Swaps and Derivatives Association (ISDA), provided guidance and protocols to help manage the transition.

What Finance and Banking Professionals Should Know

EONIA has been replaced, but benchmark changes can still affect legacy contracts and cross-currency analysis.

• Understand how €STR is calculated so you can apply it correctly in models and pricing.
• Review older documentation to catch any lingering references to EONIA.
• Follow current market conventions for discounting, collateral, and rate application.
• Check benchmark alignment in multi-currency models, especially when combining €STR with SOFR, SONIA, or SARON.

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Additional Resources

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