On 24 November, the European Parliament and Council of the EU reached agreement on a proposed Regulation on financial benchmarks. The political agreement is to be formalised by Member States at the meeting of the Permanent Representatives Committee on 9 December 2015.
The Regulation will apply to all published indices which are used to reference the price of a financial instrument or contract or measure the performance of an investment fund and will seek to:
- Ensure that benchmark administrators are subject to prior authorisation and supervision depending on the type of benchmark (e.g. commodity or interest-rate benchmarks)
- Improve the governance structure of benchmarks (e.g. management of conflicts of interest) and require greater transparency on how a benchmark is produced
- Ensure the appropriate supervision of critical benchmarks, such as EURIBOR/LIBOR, the failure of which might create risks for market participants
- Enhance the functioning and integrity of markets
Compromise has also been reached on the third country regime insofar as third country indices may continue to be used in the EU, through a new “equivalence” regime.