The Euro Overnight Index Average (EONIA) is the average overnight reference rate for which European banks lend to one another in euros. It is an important benchmark for European money markets and is used as a reference rate for a variety of financial instruments and products, including swaps and deposits. As the overnight Euro rate, EONIA is a crucial reference point in writing off a pan-European interest rate structure and pricing Euro transactions on the overnight market.

EONIA is considered a "true" rate because the ECB publishes it free of charge and applies no rate manipulations. The Euro Overnight Index Average is calculated by the European Central Bank (ECB) based on surveys of the overnight deposits made by 28 panel banks in the EU market. The ECB collects daily overnight deposit transactions from these panel banks, which are then used to calculate the rate.

EONIA is an overnight benchmark rate composed of unsecured interbank euro funds. It can serve as a reference rate for a variety of financial instruments and products, such as derivatives contracts, money market instruments, and European term deposits. It also reflects the levels of liquidity and credit risk within the euro market and gives an indication of the cost of borrowing cash in the euro zone.

In 2022, EONIA will be replaced with a new benchmark rate, known as ESTER. ESTER was selected by the European Commission after a comprehensive review of global benchmark rates and was designed to be a more comprehensive benchmark than EONIA. It uses contributions of transaction data from the Interbank Offered Rate (IBOR) and Repurchase Agreement (Repo) markets, which provide transaction data from both secured and unsecured funding transactions. As such, ESTER will measure both risk-free and risk-adjustable transactions.

EONIA has been an integral part of the Eurozone financial system and has been used as a reference rate for nearly two decades. It is used by financial institutions and investors to gain insight into the interest rate environment in the Eurozone and to set pricing for a variety of products and instruments. The release of ESTER will help provide a more comprehensive view of money markets in Europe and will help make European markets more transparent and efficient, allowing for more accurate pricing of financial instruments in euro markets.