EU benchmark regulation tick mark

On 25 November 2015, the European Commission published a communiqué welcoming the agreement reached with the European Parliament and the Council of the EU on the draft benchmark regulation.

By bringing the regulation a step closer to a vote by the European Parliament, the uptick might revive concerns expressed by those who suggested the text went beyond the scope of the IOSCO Principles for Financial Benchmarks.

The EU stands out as the only jurisdiction with the ambition to capture the use of a broad range of benchmarks. Regulatory precedents in certain jurisdictions targeted a limited number of systemically important benchmarks, while the flagship Principles issued by IOSCO in 2013 were non-binding in nature.

Key points to scrutinise in the regulation include the proportionality of the mandatory requirements according to the benchmarks` materiality, as well as the degree of openness vis-à-vis non-EU benchmarks.

It is an arcane subject, but the stakes are high: imperfect measures to tackle such concerns have the potential to threaten the viability of certain benchmarks and generate, in turn, a rush to find alternative benchmarks or, as a last resort, terminate the affected contracts.

Member States are expected to formalise the agreement in early December.

[Update: On 9 December 2015, the Permanent Representatives Committee approved, on behalf of the Council, the compromise with the European Parliament. The final compromise text is available here]

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