Euribor fallbacks could hit thin legal ice
In Italy and Germany, compound interest – the foundation of Euribor fallbacks – is actually illegal
Euribor, one of the few Ibors that will live on as the others flicker out, could face legal difficulties in its fallback rates. That’s because the compound interest those rates are based on is against the law in some parts of Europe.
In Italy, compound interest is prohibited under Article 1283 of the Civil Code, and in Germany under Section 248 of its Civil Code. In both countries, the law is aimed at shielding consumers from banks piling more and more interest on debt in arrears.
“Italy isn’t
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