Lending Reference Rates
Euro Interbank Offered Rate (EURIBOR) – for credit facilities in Euro
Definition
EURIBOR (Euro Interbank Offered Rate) is the rate at which wholesale funds in euro, for periods equal to the relevant interest period of the credit facility, could be obtained by credit institutions in the European Union (EU) and European Free Trade Association (EFTA) countries in the unsecured money market, and published on every TARGET Day[1] by the European Money Markets Institute (EMMI) (or any successor body) at or shortly after 11 a.m. Brussels time. The applicable EURIBOR for a specific interest period is set two Business Days[2] prior to the date of the commencement of such period.
The administrator of EURIBOR is the European Money Markets Institute (EMMI).
Credit facilities dated as of 09/09/2015 or thereafter provide that, in case the relevant EURIBOR is less than zero, then EURIBOR shall be deemed to be zero for the purposes of the credit facility.
Calculation methodology
EURIBOR is calculated following the methodology (referred to as the ‘hybrid methodology’) described in the Benchmark Determination Methodology for EURIBOR (https://www.emmi-benchmarks.eu/benchmarks/euribor/methodology/) and relies on contributions from a panel of credit institutions that are active participants in the euro money markets (Panel Banks) in order to determine the average rate at which wholesale funds in euro could be obtained by credit institutions in the EU and EFTA countries in the unsecured money market.
EURIBOR is grounded, to the extent possible, in euro money market transactions that reflect the Underlying Interest[3]. To ensure robustness in the absence of transactions in the Underlying Interest, the Benchmark Determination Methodology for EURIBOR follows a hierarchical approach consisting of three levels. These levels are employed progressively and in the following order:
- Level 1 consists of contributions based solely on transactions in the Underlying Interest at the Defined Tenor[4] from the prior TARGET Day, using a formulaic approach provided by EMMI.
- Level 2 consists of contributions based on transactions in the Underlying Interest across the money market maturity spectrum and from recent TARGET Days, using a defined range of formulaic calculation techniques provided by EMMI.
- Level 3 consists of contributions based on transactions in the Underlying Interest and/or other data from a range of markets closely related to the unsecured euro money market, using a combination of modelling techniques and/or the Panel Bank’s judgement.
EMMI performs an annual assessment of the EURIBOR methodology. Based on this assessment, EMMI will decide annually on any changes to the EURIBOR methodology. The objective of any change to the methodology is to ensure that the input data and methodology represent the market and economic reality EURIBOR seeks to measure.
Further details on the calculation methodology for EURIBOR, including the factors contributing to a change in the EURIBOR rate can be found in the Blueprint for the Hybrid Methοdology for the Determination of EURIBOR (https://www.emmi-benchmarks.eu/benchmarks/euribor/methodology/)as well as in the abovementioned Benchmark Determination Methodology for EURIBOR.
The Bank has informed its affected clientele with a letter sent in May 2020.You can find the relevant letter here.
London Interbank Offered Rate (LIBOR) – for credit facilities other than in Euro
Definition
LIBOR (London Interbank Offered Rate) is a wholesale funding rate anchored in LIBOR panel banks’ unsecured wholesale transactions to the greatest extent possible, with a waterfall to enable a rate to be published in all market circumstances.
LIBOR is published on each London Business Day[5] by ICE Benchmark Administration Limited (or any successor body) for each currency and tenor combination[6] at 11.55 a.m. London time. The applicable LIBOR for a specific interest period is set, either (depending on the terms of the relevant credit facility):
(i) two Business Days[7] prior to the date of the commencement of such period (for credit facilities in US Dollar, Swiss Franc and Japanese Yen and certain credit facilities in Pound Sterling); or
(ii) on the first day of commencement of such period (for certain credit facilities in Pound Sterling).
The administrator of LIBOR is the ICE Benchmark Administration Limited (IBA).
Credit facilities dated as of 09/09/2015 or thereafter provide that, in case the relevant LIBOR is less than zero, then LIBOR shall be deemed to be zero for the purposes of the credit facility.
Calculation methodology
LIBOR is calculated following the methodology described in the ICE LIBOR Methodology and relies on contributions from a panel of contributor banks (Panel Banks) in order to produce an average rate that is representative of the rates at which large, leading internationally active banks with access to the wholesale, unsecured funding market could fund themselves in that market in particular currencies for certain tenors.
Particularly, as per ICE Benchmark Administration Limited (IBA), LIBOR is based on Panel Bank submissions through the use of a standardised, transaction data-driven Waterfall Methodology, as set out below:
- Level 1 (Transaction-Based)
Where a Panel Bank has sufficient eligible transactions, a volume weighted average price of such eligible transactions, with a higher weighting for transactions booked closer to 11:00 am London time. Eligibility criteria for transactions are specified by IBA.
- Level 2 (Transaction-Derived)
Where a Panel Bank has insufficient eligible transactions to make a Level 1 submission, it will seek to make a submission based on transaction-derived data, including time-weighted historical eligible transactions adjusted for market movements and linear interpolation. Eligibility criteria for transaction derived data are specified by IBA.
- Level 3 (Expert Judgement)
Where a Panel Bank has insufficient eligible transactions or transaction-derived data to make a Level 1 or a Level 2 submission, it will submit the rate at which it could fund itself at 11:00 am London time with reference to the unsecured, wholesale funding market. Each Panel Bank agrees its defined Level 3 submission methodology with IBA, basing its rate on transactions, related market instruments, broker quotes and other market observations.
IBA in conjunction with the LIBOR Oversight Committee keep the LIBOR Methodology under review.
Further details on the calculation methodology for LIBOR, including the factors contributing to a change in the LIBOR rate can be found in the above mentioned ICE LIBOR Methodology
The Bank has informed its affected clientele with a letter sent in May 2020.You can find the relevant letter here.
European Central Bank Base Rate (ECB Base Rate)
The ECB Base Rate is the interest rate set by the Governing Council of the European Central Bank (ECB) from time to time during its monetary policy meetings, based on which ECB main refinancing operations of the Eurosystem are carried out through a weekly tender procedure for fixed rate tenders.
The ECB Base Rate may increase or decrease from time to time.
The ECB Base Rate applicable from time to time is published on the website of the ECB https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html
Given that the interest rate of the credit facility includes the ECB Base Rate, the interest rate of the credit facility will change on the effective date of a change in the ECB Base Rate. Any changes to the ECB Base Rate are announced through a press release of the Governing Council of the ECB regarding monetary policy decisions, which is posted on the website of the ECB https://www.ecb.europa.eu/press/pr/activities/mopo/html/index.en.html. Any such change in the ECB Base Rate shall have effect as from the date mentioned in the relevant press release as the date on which the relevant interest rate change shall start and/or from which it shall have effect.
If the ECB Base Rate is less than zero (0) at any time, then the ECB Base Rate applied by the Bank shall be deemed to be zero (0) for the purposes of calculating your interest rate for the period for which the ECB Base Rate is set by the Governing Council of the ECB as being less than zero (0). In such a case, the interest rate that the Bank will apply to the credit facility for that period, shall be ECB Base Rate = zero (0) plus margin.
An update for the change in market interest rate can be found here. The Bank has informed its affected clientele in December 2022.
The Bank’s Base Rates – for credit facilities in Euro
- Bank Base Rate (BBR)
BBR is the Base rate of the Bank of Cyprus and is calculated as follows:
- For loans that have been granted prior to the 1st January 2008:
The Bank’s Base Rate applicable to loans that have been granted prior to the 1st of January 2008 and continue to be in force, is the European Central Bank Base Rate (ECB Base Rate), as defined hereunder:
The ECB Base Rate is the interest rate set by the Governing Council of the European Central Bank (ECB) from time to time during its monetary policy meetings, based on which ECB main refinancing operations of the Eurosystem are carried out through a weekly tender procedure for fixed rate tenders.
The ECB Base Rate may increase or decrease from time to time.
The ECB Base Rate applicable from time to time is published on the website of the ECB https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html
Given that the interest rate of the Loan includes the ECB Base Rate, the interest rate of the Loan will change on the effective date of a change in the ECB Base Rate. Any changes to the ECB Base Rate are announced through a press release of the Governing Council of the ECB regarding monetary policy decisions, which is posted on the website of the ECB https://www.ecb.europa.eu/press/pr/activities/mopo/html/index.en.html. Any such change in the ECB Base Rate shall have effect as from the date mentioned in the relevant press release as the date on which the relevant interest rate change shall start and/or from which it shall have effect.
- For credit facilities entered into on or after 1 January 2008:
The BBR is calculated as the sum of (a) the average interest rate paid on euro-denominated household deposits in the Republic of Cyprus (outstanding amounts) by euro area residents with agreed maturities of up to 2 years as published on the website of the Central Bank of Cyprus on a monthly basis[8](the ‘CBC benchmark rate’) and (b) a fixed spread of 2.24%. The BBR is revised on a quarterly basis (15 March, 15 June, 15 September & 15 December)[9] using the latest available CBC benchmark rate.
- Bank Business Base Rate / Base Rate for Commercial Facilities (BBBR)
BBBR is the Business Base rate of the Bank of Cyprus and is calculated as the sum of (a) the CBC benchmark rate and (b) a fixed spread of 1.24%. The BBBR is revised on a quarterly basis (15 March, 15 June, 15 September & 15 December)[10] using the latest available CBC benchmark rate.
- Bank Housing Base Rate / Base Rate for Housing Loans (ΒHBR)
BHBR is the Housing Base rate of the Bank of Cyprus and is calculated as the sum of (a) the CBC benchmark rate and (b) a fixed spread of 0.49%. The BHBR is revised on a quarterly basis (15 March, 15 June, 15 September & 15 December)[11]using the latest available CBC benchmark rate.
Further information on the above reference interest rates can be found on the following websites:
CBC benchmark rate: www.centralbank.cy
Euribor: www.emmi-benchmarks.eu
Libor: www.theice.com/iba/libor
[1] TARGET is the Trans‐European Automated Real‐time Gross Settlement Express Transfer System. The Eurosystem maintains TARGET2, which is the second generation of TARGET and is a real‐time gross settlement system. References to “TARGET” should be read with respect to the euro system’s TARGET2 system. ‘TARGET Day’ is a day on which the TARGET system is operating.
[2] ‘Business Day’ is any day (other than a Saturday and Sunday) on which commercial banks in Cyprus are generally open for business and a day on which the TARGET system is operating, unless otherwise defined in the terms of the relevant credit facility.
[3] The Underlying Interest for EURIBOR as per EMMI is defined as “the rate at which wholesale funds in euro could be obtained by credit institutions in the EU and EFTA countries in the unsecured money market.”
[4] There are five “Defined Tenors” for EURIBOR, being 1 Week, 1 Month, 3 Months, 6 Months and 12 Months.
[5] 'London Business Day’ is any day (other than a Saturday and Sunday) on which commercial banks are generally open for business in London.
[6] LIBOR is calculated for five currencies (USD, GBP, EUR, CHF and JPY) and for seven tenors in respect of each currency (Overnight/Spot Next, 1 Week, 1 Month, 2 Months, 3 Months, 6 Months and 12 Months).
[7] ‘Business Day’ is any day (other than a Saturday and Sunday) on which commercial banks in Cyprus and London are generally open for business, unless otherwise defined in the terms of the relevant credit facility.
[8] Published under Monetary and Financial Statistics (‘’MFI interest rates on euro-denominated deposits (outstanding amounts) by euro area residents”) at www.centralbank.cy.
[9] Or the next working day if not a business day.