The Commission has published its proposal for a Regulation on indices used as benchmarks in financial instruments and financial contracts (the Benchmark Regulation). The proposal will require:
- those who provide benchmarks to be authorised and supervised at national and European level;
- benchmark administrators to avoid conflicts of interest where possible, and manage them adequately where they cannot avoid them;
- sufficient and accurate data to be used in setting benchmarks, so benchmarks represent the actual market or economic reality they are intended to measure. Verified estimates would be allowed only when no real transaction data is available;
- the administrator to produce a code of conduct setting out the obligations and responsibilities of contributors who provide input data for a benchmark;
- more transparency of the data used to calculate the benchmark and of the calculation method; and
- banks to assess suitability for consumers where necessary, for instance when drawing up mortgage contracts.
The Commission proposes colleges of supervisors for critical benchmarks, and says each college will include ESMA, which will be able to make binding mediation decisions if college members cannot agree. It also suggests a power for the relevant competent authority to compel contributions to critical benchmarks. Finally it imposes sanctions for breach of the Regulation. The Commission says it expects the legislative process to adopt the Regulation to be complete by the end of the current parliamentary mandate, and for it to take effect one year later. (Source: Commission Publishes Benchmark Regulation Proposal)