The EU Benchmarks Regulation (BMR) has passed another significant milestone with the news that the ten Commission Delegated Regulations that make up the Regulatory Technical Standards (RTS) for BMR have been published in the Official Journal of the European Union.
The RTS, which were adopted in draft by the European Commission back in July 2018, detail what will be required of benchmark administrators and contributors under BMR. The Regulation will create a more stringent regulatory environment for all benchmark administrators, contributors and users, and carries with it the threat of stiff fines for non-compliance (up to €1 million or 10% of annual income).
The Commission Delegated Regulations are set to come into force on November 25 and will apply across the EU from January 25, 2019. The RTS apply to a range of elements around BMR including, but not limited to: the characteristics of the oversight function for benchmark administrators; the appropriateness and verifiability of input data and benchmark contributors; the information to be provided by administrators of critical or significant benchmarks; the information to be provided on an application for authorization or registration; etc.
The development should be welcomed in that it brings greater clarity to what BMR will mean for benchmark administrators and contributors. Despite BMR having been in force for nearly one year, there is still much uncertainty among administrators around what their obligations are, and which course of authorization is most appropriate for them.
This uncertainty is felt particularly keenly in third-country jurisdictions. Indeed, as we discussed previously there is a possibility that many third-country administrators may choose to withdraw their benchmarks rather than go through the authorization process. It is therefore welcome that the RTS provides clarification on the form and content of an application for recognition of a third-country administrator with the competent authority of the Member State of reference. It should be hoped that the clarity this brings will inspire more third-country administrators to seek authorization sooner rather than later.
Benchmark users, meanwhile, are advised to keep watch over how this development will affect the EU benchmarks landscape. ESMA keeps a register of approved benchmarks, and it will be interesting to see what effect the RTS will have on the register when they come into play this January. The Regulation is currently operating under a period-of-grace up until 2020, and the biggest impacts of BMR are still to be felt. Benchmark users should use the little time available to put in place an agile, data-driven system for maintaining their benchmarks universe as it shifts in the light of BMR.
RIMES has convened a panel of experts to discuss the next steps around BMR at a Regulatory Seminar on November 21. Email email@example.com for more details or to register.
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