European Central Bank (ECB) started Quantitative Easing (QE) program last year for European Banks which has resulted into
- Weakening of Euro Currency
- Negative Inter Bank Rates (EURIBOR)
Till September 2014 Euribor was in positive territory post which Euribor has turned negative for period of 1 Month, 2 Months and 3 Months (Refer below chart).
In earlier article “Buyers Credit Interest Rate (Libor + Margin)” we have discussed on how overseas banks quote interest rate on buyers credit. One such example is given below;
For a 3 Month Transaction Quote:
3 Month Euribor + 75 bps pa
0.10 + 0.75 = 0.85% pa.
With EURIBOR in negative territory post September 2014, for same buyers credit in Euribor for 3 Months at the same pricing cost has come down.
For a 3 Month Transaction Quote:
3 Month Euribor + 75 bps.
– 0.143 + 0.75 = 0.607 bps.
Impact on Importer : Reduction in Buyers Credit Cost
Impact on Buyers Credit Banks
- Reduction in Margin.
- You might have noticed, many Indian bank overseas branches outside Euro Zone have stopped doing buyers credit transactions in Euro Currency.
- Recent Update: Buyers Credit Bank are charging Min 0.01% Euribor or is charging 12M Euribor for all transaction as its still in positive territory. 12 Month Euribor : 0.048%
Latest EURIBOR Rate Chart
| Euribor maturity / rate | 01-19-2016 | 01-18-2016 | 01-15-2016 | 01-14-2016 |
| 1 month | -0.222 % | -0.222 % | -0.221 % | -0.221 % |
| 2 months | -0.182 % | -0.181 % | -0.179 % | -0.181 % |
| 3 months | -0.143 % | -0.142 % | -0.142 % | -0.143 % |
| 6 months | -0.056 % | -0.054 % | -0.054 % | -0.053 % |
| 9 months | -0.011 % | -0.009 % | -0.010 % | -0.009 % |
| 12 months | 0.048 % | 0.049 % | 0.049 % | 0.048 % |
Buyer's Credit & Supplier's Credit 