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EU benchmark reform efforts hit speed bump

European Union officials’ efforts to reform benchmark regulations ran into an obstacle lately, as members of the European Parliament have thus far failed to agree on which particular measures should receive heightened scrutiny. Because of this impasse, discussions have deteriorated completely, EP member Kay Swinburne stated during an industry event, according to FX Week.

Global momentum
This breakdown has happened even though the March 9 deadline for a decision has passed, Swinburne noted during a Futures Industry Association conference, the media outlet reported. While reform efforts in the EU have stalled as of late, they have fortunately run into trouble at a time when the desire to create the ideal regulatory framework has garnered significant momentum.

“Because of this impasse, discussions have deteriorated completely.”

Financial benchmarks drew the attention of regulators following the LIBOR scandal, and these organizations have put substantial effort into creating more effective policies to govern the creation and use of these key measures.

For example, the International Organization of Securities Commission’s task force for financial benchmarks has supplied a report containing principles for these measures in July 2013. Since then, the organization has been keeping tabs on financial institutions, monitoring how effectively they are following the supplied guidelines.

In addition to adhering to these principles, banks around the world must supply transaction data any time they submit LIBOR information.

EU regulatory developments
EU government officials have taken their own approach to the global push for benchmark reform, working toward providing the 28-nation consortium with more stringent regulations. There has been progress and pain as a result of these efforts, as important entities in the region have reached key milestones and also suffered setbacks.

In spite of these difficulties, members of the EP are still working to obtain resolution, according to FX Week.

EU efforts to reform benchmark regulations recently hit an obstacle.

“The negotiations are ongoing and we were meant to have come to an agreement this week, but it has fallen apart. We are still comprising and trying to find a way,” she told the news source. “The big difference is on the definition of what a critical benchmark is and what a non-critical benchmark is. The regulatory framework for the critical benchmarks will be mandatory – there will be binding rules and there will be regulated entities.”

Under the original proposal written by the European Commission, benchmarks would need to be tied to investment funds with at least 500 billion euros ($544 billion) to be classified as critical, according to Reuters. When the 28 member nations of the EU took a look at the proposal, they decided to amend it, adding two new definitions to grant supervisors authority over national and cross-border benchmarks, a diplomat told the news source on condition of anonymity.

Measures classified as non-critical will receive less scrutiny and will need to follow IOSCO principles for financial benchmarks, Swinburne told FX Week.

“There will be a very different set of rules for those in non-critical benchmarks, which will have to comply with IOSCO principles for financial benchmarks. This would be a non-binding regime and a much less onerous one,” she told the news source.

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