19 May 2015

EP agrees negotiating mandate for regulation of financial benchmarks

The Commission proposed new standards in September 2013 in the wake of the alleged manipulation of various benchmarks including inter-bank offered rates (EURIBOR, LIBOR, etc.) and other benchmarks, such as those for foreign exchange (FX) and commodities, including gold, silver, oil and biofuels.

The proposed EU rules aim to improve the functioning and governance of benchmarks that are produced and used in the EU in financial instruments such as bonds, shares, futures or swaps, and in financial contracts such as mortgages.

"It is consumers who ultimately have to pay the price when benchmarks are manipulated or unreliable as this can increase the cost of their mortgage repayments or the returns on their pension funds," said Jonathan Hill, EU Commissioner responsible for Financial Stability, Financial Services and Capital Markets Union. "Our proposal will put in place rules for safer benchmarks across the EU. I am confident that we can now move swiftly to find an agreement on a final text.”

The Commission first proposed a Regulation on benchmarks in September 2013 to improve the functioning and governance of benchmarks produced and used in the EU and to ensure they are not subject to manipulation. The regulation upholds the principles agreed at international level by the IOSCO in 2012 and 2013. The Council already agreed on a negotiating mandate as regards that proposal in February 2015.

When adopted, the proposal will contribute to the accuracy and integrity of benchmarks used in financial instruments and financial contracts by:

·         ensuring that contributors to benchmark are subject to prior authorisation and on-going supervision depending on the type of benchmark (e.g. commodity or interest-rate benchmarks);

·         improving their governance (e.g. management of conflicts of interest) and requiring greater transparency of how a benchmark is produced;

·         ensuring the appropriate supervision of critical benchmarks, such as EURIBOR/LIBOR, the failure of which might create risks for many market participants and even for the functioning and integrity of markets of financial stability.

The so-called trialogues between the European Parliament, Council and Commission will start in June.

Full press release

© European Commission