On 28 April 2016, the European Parliament published a press release announcing that it has voted in plenary to adopt the proposed Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (Benchmark Regulation). The European Commission published a press release welcoming the Parliament's vote. The final text of the Benchmark Regulation adopted by the Parliament has not yet been made available.

  • The Benchmark Regulation will enter into force following formal adoption by the Council (which is expected in May 2016) and publication in the official journal. The majority of provisions will apply 18 months thereafter (likely early 2018) with some provisions applying on the day it comes into force. 
  • The Benchmark Regulation introduces a new EU regime regulating producers of, contributors to and users of benchmarks
  • Supervised entities (including UCITS, UCITS ManCos, AIFs and AIFMs) will not be permitted to use unregulated benchmarks. 
  • Non-EU benchmarks can only be used in the EU if the benchmark is qualified under the third country regime.
  • The Benchmark Regulation aims to contribute to the accuracy and integrity of benchmarks used in financial instruments and financial contracts by:
    • ensuring that benchmark administrators 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.
  • Existing UCITS and AIFs will need to ensure that the benchmarks they use are working to comply with the Benchmark Regulation or find an alternative. For UCITS prospectuses approved prior to the end of the transitional period (18 months after the Benchmark Regulation enters into force) the underlying documentation will need to be updated at the next update and in any event no later than 12 months thereafter.
  • Supervised entities that issue financial instruments that reference a benchmark must produce "robust written plans" that set out the actions they would take should the benchmark materially change or cease to be produced. On request, these plans must be provided to the relevant competent authority.
  • The regulation implements and is in line with the principles for oil price reporting agencies and financial benchmarks agreed at international level by the International Organization of Securities Commissions (IOSCO) in 2012 and 2013.