On September 7, the Global Financial Markets Association (GFMA) published a letter setting out principles that it proposes to assist in the setting of global financial benchmarks such as LIBOR. The principles outline a set of best practice standards for conducting benchmark price assessments. The principles state that the overall responsibility for the benchmark process lies with the entity or group that develops and issues the benchmark (the “sponsor”). The Principles are grounded in three fundamental sponsor obligations, which GFMA believe should be applied in a manner commensurate with the significance of the benchmark:
- Governance: A sponsor should ensure that there is an appropriate governance structure for oversight of the benchmark;
- Benchmark Methodology and Quality: A sponsor should employ sound design standards in devising the benchmark and ongoing processes related to its operations; and
Controls: A sponsor should ensure that there is an appropriate system of controls promoting the efficient and sound operation of the benchmark process and should implement such a system of controls.