There's a term that's often used in contracts for variable-rate (var.) property or business financing: 3-month Euribor. This financial indicator, which reflects the short-term cost of money between banks in the eurozone, has a direct impact on your repayments. Its fluctuations, especially when interest rates fluctuate sharply, can raise legitimate questions. Understanding how it works is the first step, but knowing exactly what your rights are as a borrower is essential to protecting your interests and your savings.
This article provides a comprehensive analysis of the 3-month Euribor indicator. We will look at how it is regulated, its impact on your repayments, and above all your bank's obligations and the practical legal remedies available to you in the event of an unfair clause, an error in the finance agreement, or financial difficulties that could lead to over-indebtedness.
What is the 3-month Euribor index and how is it regulated?
The 3-month Euribor (Euro Interbank Offered Rate) is the average interest rate at which a panel of major European banks agree to lend each other funds for a period of three months. Calculated daily by the European Money Markets Institute (EMMI) and published by agencies such as Reuters, it is used as a reference rate for many financial products, including variable-rate loans, but also for more complex derivatives such as interest rate swaps and trading contracts. Its price influences the currency market, particularly the euro/dollar pair, and it is used on the stock market to value certain assets.
Definition and calculation mechanism by the banking panel
Every working day, a panel of major European banks (such as Crédit Agricole in France, for example) transmit the rates at which they estimate they can borrow on the interbank money market for different maturities (1 week, 1 month, 3 months, 6 months, etc.). After discarding the most extreme values to avoid manipulation, EMMI, its official administrator, calculates an average which becomes the official Euribor rate for the day. This process is governed by Regulation (EU) 2016/1011, known as the "Benchmark" Regulation, which aims to guarantee the transparency, robustness and reliability of benchmark indices following the Libor and Euribor manipulation scandals, two crucial rates for the financing market. The rate is then published, usually before noon (Central European Time). Financial platforms provide a detailed overview of its evolution, often in the form of a table or graph to make it easier to read.
Monitoring benchmark indices: role of the ECB and the Banque de France
Although Euribor is not the key rate of the European Central Bank (ECB), it is strongly influenced by its monetary policy decisions. An increase of a few basis points in the ECB's key rates has an almost mechanical impact on the Euribor. Beyond this influence, the Banque de France, as a member of the European System of Central Banks (ESCB), plays an essential role. It oversees the stability of the financial system and the security of payment systems, such as the TARGET network through which hundreds of billions of euros pass between banks every day, including millions of transactions. This institutional oversight guarantees that the indicator on which your financing is based is based on a reliable and controlled mechanism.
How does the 3-month Euribor affect your loan in practice?
In a variable-rate loan (var.), the interest rate applied to your finance is made up of two parts: the 3-month Euribor, which is the variable part, and a fixed margin (or "spread"), a percentage added by the bank. The formula is simple: your loan rate = 3-month Euribor rate + the bank's spread. Your finance agreement must specify how often the rate is to be reviewed (usually quarterly, half-yearly or annually), based on the value of the indicator on a reference date.
A rise in the Euribor means an increase in your interest rate at the next review, which translates into a higher repayment term or a longer repayment period. Conversely, a fall in the indicator reduces your repayments. To protect you against rates rising too high, some contracts include a 'capped rate' clause, which sets a ceiling that the rate of your loan can never exceed, offering considerable security if the benchmark rate does not remain low.
Duty to warn and analyse solvency: the bank's obligations
Even before the contract is signed, the law imposes strict obligations on the lender to protect the borrower. These obligations are your first rights, and failure to meet them can have serious consequences for the bank.
Assessing creditworthiness and consulting the FICP
Under the Consumer Code, lenders are legally obliged to assess your creditworthiness before granting you finance. This analysis is not based solely on your declarations; it involves checking your financial situation, in particular by consulting the Fichier national des Incidents de remboursement des Crédits aux Particuliers (FICP). The aim is to ensure that the proposed financing is suited to your repayment capacity, even if the Euribor rate changes.
Breach of the duty to warn and penalties
Case law has established a "duty to warn" on the part of the banker with regard to uninformed borrowers. If the credit presents a risk of excessive debt in relation to your financial capacity, the bank must explicitly warn you. Simply providing a standardised information sheet, even if it is provided correctly, is not enough to fulfil this obligation. If the bank fails in this duty and grants you a loan that is manifestly unsuitable, it is guilty of misconduct. The most severe penalty is forfeiture of the right to interest: in other words, you would only be required to repay the capital borrowed.
Your rights and remedies as a borrower: challenging the terms of your loan agreement
Once the loan has been signed, you still have a number of legal levers at your disposal to assert your rights if the document contains irregularities. The law offers solid protections, often little-known, that allow you to challenge the validity of certain clauses, or even the contract itself.
Identifying and challenging an unfair Euribor clause
Article L. 212-1 of the Consumer Code defines a clause as unfair if it creates a significant imbalance between the rights and obligations of the parties to the detriment of the consumer. An indexation clause based on 3-month Euribor that is ambiguous or illegible, or that does not allow the borrower to check the calculation of the rate applied, may be considered unfair. The judge has the power to identify such a clause ex officio and declare it "unwritten", thereby rendering it inapplicable.
The case of an incorrect APR: from nullity to forfeiture of interest entitlement
The Annual Percentage Rate of Charge (APR) must include all the compulsory costs associated with granting credit. Any irregularity in the calculation of the APR is a frequent error that is heavily penalised. A classic cause of error is the use of the "Lombard year", which involves calculating interest on the basis of 360 days instead of the 365 days of the calendar year (which begins on 1 January), thereby illegally increasing the cost of the credit. Case law has evolved: whereas the penalty used to be the substitution of the legal interest rate for the contractual rate, it is now the forfeiture of the right to interest for the lender. The judge may vary this penalty depending on the seriousness of the fault and the harm suffered by the borrower.
Interdependence of contracts: cancelling credit if the goods financed are not delivered
Many variable-rate loans are "earmarked loans", i.e. they are taken out to finance a specific good or service (purchase of a vehicle, installation of solar panels, etc.). The law establishes a legal interdependence between the contract of sale (main contract) and the credit agreement. If the main contract is cancelled or rescinded (for example, for non-delivery of the goods or a major hidden defect), the credit agreement is automatically cancelled or rescinded. This protection is fundamental: it frees you from the obligation to repay a loan for goods that you have not received or that are unusable.
Rights of the guarantor: opposability of the two-year prescription period (Case 2022)
A major reversal of case law by the Cour de cassation in April 2022 has strengthened the rights of natural person guarantors. Previously, the two-year limitation period for an action for payment by the creditor was considered to be a personal right of the consumer-borrower, which the guarantor could not invoke. From now on, the guarantor can invoke this two-year limitation period against the creditor. In practical terms, if the bank has not brought an action for payment against the principal borrower within two years of the first unpaid incident on the latter's current account, it will no longer be able to sue the guarantor.
Over-indebtedness and Euribor: what to do when rising interest rates become unsustainable?
A sudden and sustained rise in the Euribor can throw a budget into turmoil and make it impossible to repay the loan, leading to a personal liquidity crisis. When the situation becomes critical, the personal over-indebtedness procedure, governed by the Consumer Code, offers a practical and protective solution.
Conditions for applying for overindebtedness
The procedure is open to any individual acting in good faith who finds it "manifestly impossible to meet all his non-business debts that are due and payable". There is no need to wait until you have suspended payments. Simply stating that the amount of your debts (including the Euribor loan) has become structurally unbearable in relation to your income and current expenses justifies filing an application with the Banque de France over-indebtedness commission.
The essential criterion of the debtor's "good faith" and its assessment
Good faith is an essential condition, but it is presumed. It is up to the creditor who disputes it to prove the debtor's bad faith. Bad faith is only accepted if the debtor has intentionally organised or aggravated his insolvency. Mere carelessness, poor management or the fact of having been overtaken by a rise in interest rates are not sufficient to constitute bad faith. The assessment is made globally, taking into account the debtor's behaviour before and at the start of the procedure; it is essential to take into account the debtor's situation.
Outcomes of the procedure: from recovery plan to debt write-off
Once the case has been deemed admissible, the over-indebtedness commission looks for a solution. This can result in two types of measure:
- The conventional recovery plan : This involves an amicable agreement or, failing that, measures imposed by the commission (deferment, rescheduling of payments, reduction in interest rates, etc.) over a maximum period of seven years.
- The personal recovery procedure : For the most compromised situations, this procedure can result in the partial or total cancellation of debts, with or without the judicial liquidation of the debtor's assets.
For full support, you can consult our detailed guide to the overindebtedness procedure (new page).
The evolving regulatory framework: towards a new European directive
Consumer credit law is constantly evolving to strengthen the protection of borrowers. Euribor is already governed by the 2016 Benchmark Regulation, which imposes strict governance and transparency rules on its administrator, EMMI, which has taken over this role from the European Banking Federation. More recently, Directive (EU) 2023/2225 was adopted by the Parliament and the Council, on a proposal from the European Commission, and will have to be transposed by the Member States by December 2025, with application starting in January 2026. It will replace the 2008 directive and aims to modernise the legal framework, in particular by improving the assessment of solvency, capping certain charges and tightening the rules on advertising. This development reflects the ongoing desire of Europe's legislators to adapt the law to new practices in the credit sector.
Need help with your Euribor-indexed loan?
Is your loan indexed to the 3-month Euribor and are you wondering about the legality of its clauses or the consequences of a rise in interest rates? Our firm, which specialises in helping individuals and businesses, is at your disposal to analyse your loan agreement to identify any unfair clauses, errors in the APR or breaches by the lender of its obligations. The final overview of your situation will help us to guide you. To find out more about our services in banking and finance lawContact us for an initial assessment of your situation.
Legal sources and references
- Consumer Code (in particular articles L. 212-1 on unfair terms, L. 312-1 et seq. on consumer credit, and L. 711-1 et seq. on over-indebtedness)
- Civil Code (in particular articles 1104 on contractual good faith and 2298 on suretyship)
- Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on benchmarks
- Directive (EU) 2023/2225 of the European Parliament and of the Council of 28 February 2023 on consumer credit
- Case law of the Cour de cassation and the Court of Justice of the European Union (CJEU)
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