The ISDA Bilateral Template EONIA Amendment Agreement: What You Need to Know

The International Swaps and Derivatives Association (ISDA) Bilateral Template EONIA Amendment Agreement is an important tool for participants in the financial industry. The agreement allows parties to amend their existing transactions that reference the Euro Overnight Index Average (EONIA) to accommodate the new methodology that was implemented in 2019. This change in methodology was necessitated by the European Money Markets Institute`s decision to discontinue the EONIA benchmark at the end of 2019.

The ISDA Bilateral Template EONIA Amendment Agreement is a legal agreement that enables two parties to modify the terms of an EONIA-linked transaction. The agreement is based on the 2002 ISDA Master Agreement, which is widely used in the financial industry. It specifies the terms and conditions for the amendment and ensures that both parties are bound by the same terms.

Under the agreement, parties can modify the fallback provisions in their existing transactions and include the new EONIA methodology, which is based on the Euro Short-Term Rate (ESTER). The new methodology is designed to be more robust and reliable than the old EONIA methodology, which was based on a panel of banks providing quotes. The ESTER methodology is based on actual transactions that occur in the wholesale euro money market, making it a more accurate reflection of market conditions.

The ISDA Bilateral Template EONIA Amendment Agreement provides a simple and cost-effective solution for parties to amend their transactions. It avoids the need for parties to negotiate amendments on a case-by-case basis, which can be time-consuming and costly. By using the template agreement, parties can quickly and efficiently modify their existing transactions to comply with the new EONIA methodology.

In conclusion, the ISDA Bilateral Template EONIA Amendment Agreement is an important tool for participants in the financial industry. It allows parties to modify their existing transactions to accommodate the new EONIA methodology, which is based on the more robust and reliable ESTER methodology. By using the template agreement, parties can quickly and efficiently modify their transactions and avoid the need for costly and time-consuming negotiations. As such, it is an agreement that all participants in the industry should be aware of.