Euribor Panels and Unsecured Interbank Lending
Euribor is the euro-area benchmark rate at which a panel of banks estimates they could borrow unsecured from each other, and it still underpins large volumes of euro loans and derivatives despite the broader shift toward transaction-based rates.
Much of the euro area's borrowing — corporate loans, mortgages, floating-rate bonds — is priced off a single reference number: Euribor, the Euro Interbank Offered Rate. Each business day, a panel of roughly 20 large banks submits the rate at which they believe they could borrow unsecured funds from another prime bank, across maturities from one week to twelve months, and the reported rate is a trimmed average of those submissions.
Euribor is a panel-based estimate of unsecured interbank borrowing costs, not a rate actually paid on every transaction, which is why regulators pushed to anchor it more firmly in real transactions after the 2012 rate-rigging scandals.
Unlike LIBOR, which was discontinued, Euribor survived post-scandal reform by switching to a "hybrid" methodology: submissions are based on real transaction data where available, and only fall back to expert judgment when a bank has too few actual trades in a given maturity to calculate a rate directly. This kept Euribor legally and practically usable while addressing the manipulation concerns that killed LIBOR.
Worked example. A eurozone corporate loan is priced at 3-month Euribor plus a 150 basis point margin. If 3-month Euribor is quoted at 3.70%, the borrower pays 3.70% + 1.50% = 5.20% for that quarter. If Euribor resets to 3.55% the following quarter, the borrower's rate falls to 5.05%, tracking the benchmark automatically.
Euribor sits alongside €STR (the euro short-term rate, a fully transaction-based overnight rate) as the two benchmarks now used in the eurozone, with €STR increasingly used for derivatives and Euribor retained mainly for term lending products.
Further reading
- European Money Markets Institute, Euribor Methodology