Having slowed to a near standstill in 2014, the Proposal for a Regulation of the European Parliament and of the Council on indices used as benchmarks in financial instruments and financial contracts appears to being rushing for a sprint finish in 2015.
The latest proposal is supported by all delegations of the Council of the European Union, and as such the General Secretariat has published a note recommending that the Permanent Representatives Committee agree on the negotiating mandate for the proposed Regulation based on the text detailed in the Annex to the note. The note also recommends inviting the Presidency to start negotiations with the European Parliament with a view to reaching an agreement at the first reading.
The proposal has been examined by the Working Party on Financial Services in 14 meetings during the Hellenic, Italian and Latvian Presidencies, and six compromise proposals have been prepared with a view to reaching an agreement on a negotiating mandate for the Presidency for the negotiations with European Parliament.
The text of the proposed Benchmark Regulation runs to over 100 pages, this will be even greater once the European Securities and Markets Authority (ESMA) as mandated by the Regulation, drafts the regulatory technical standards required to make the rules effective. ESMA has been tasked with hammering out much of the finer detail particularly with regards to exemptions, ensuring that the final rules will work from both a market and supervisors standpoint.
ESMA will also coordinate the supervision of benchmark administrators by national regulators. For the benchmarks defined as ‘critical’ by the Regulation, a college of national supervisors, including ESMA, will be set up and empowered to take key decisions relating to the uninterrupted running of the benchmarks including the power to force contributions of data to the Administrator, and cessation plans for key benchmarks.
The International Organization of Securities Commissions (IOSCO) has already published its Principles for Financial Benchmarks, which have been adopted by many benchmark administrators globally, and at a regional level post the LIBOR scandal, numerous National Supervisors quickly passed criminal sanctions for the manipulation of financial indices and benchmarks including the United Kingdom and Holland.
The European Central Bank and the European Economic and Social Committee adopted their opinions back in early January 2014. The report of the ECON Committee of the European Parliament is still pending; the Committee is expected to vote on its report in early March 2015.
The European Parliament has updated the procedure file on the proposed Benchmark Regulation to show an indicative plenary sitting of the 7th July 2015.