Benchmark Regulation

In the financial industry benchmarks (e.g. LIBOR and EURIBOR) are used in many products and contracts to e.g. determine price or measure performance. In the wake of their alleged manipulation, the regulator has adopted new rules to improve the governance of benchmarks produced and used in the EU for financial products such as bonds, shares, derivatives and loans.

The Benchmark Regulation (BMR) defines controls for benchmark processes and sets requirements to advance the quality of input data and methodologies used by benchmark administrators. Furthermore, BMR sets specific obligations for the roles of administrators and data contributors plus introduces protection for benchmark users.

2019
2020
2021
2022
2023
2024
4
1
Implementation / enforcement 07/2012 - 09/2013
2
Discussion / consultation 09/2013 - 06/2016
3
Implementation / enforcement 06/2016 - 01/2018
4
In effect 01/2018 -

STATUS
The benchmark regulation has entered into force on 30 June 2016. The regulation has become applicable on 1 January 2018 for new benchmarks. Existing benchmarks have a transition period until 1 January 2020 to comply.

The BMR is applicable for administrators, supervised contributors and users of 'benchmarks'. The objectives of the BMR are essentially the ones set forth in the IOSCO Principles for Financial Benchmarks as published in 2013. BMR allows supervised entities to use only those benchmarks which are authorized, and thus included in the ESMA register.

Currently, all significant interest rate benchmarks used in the EU have been recognized as BMR non-compliant. Therefore, these interbank offered rates (IBOR) are to be migrated to risk free rates (RFR) by January 2020. Currently, international regulatory initiatives and working groups in different jurisdictions are defining RFR candidates as possible replacements to IBORs.

Further information:
European Commission: Benchmarks
KPMG: De rentebenchmark transitie vraagt nu om actie

 

 

author
Rob Voster Senior Manager
Categories: Financial Market Organisation Liquidity Capital and Risk