In a new communication to the UK’s financial services industry, the Financial Conduct Authority (FCA) has urged all relevant stakeholders to act now to understand how the EU’s Benchmarks Regulation (BMR) will affect their organizations. BMR, which comes into force on January 1, 2018 is the EU’s far-reaching attempt to put an end to the manipulation of benchmarks used in financial instruments and contracts. The FCA’s latest communication is significant in that it urges benchmark users, as well as benchmark administrators, to act.
The implications of BMR for benchmark users are significant. Not only will all asset managers, servicers and insurance companies need to ensure the benchmarks they use are compliant with the regulation, and from accredited administrators, but firms that use bespoke or blended benchmarks might find themselves classed as administrators for the purposes of the legislation. Such firms would be required to invest in an oversight function and ensure they are able to report on the many complex assurance requirements of the legislation.
The FCA advises that firms first discover what they are classified as under BMR: a benchmark administrator, contributor or user. In addition to this, RIMES recommends buy-side firms audit the indices they use today to understand which will be classified as benchmarks under the new regime.
RIMES recently hosted its second BMR Seminar in London and Paris to discuss these and other issues. At the event, a range of experts provided interpretations, advice and recommendations for benchmark administrators and users. For any firm unsure of where they will stand come January 1, this Seminar will provide a useful introduction. The full event can be viewed here.
In order to help the buy-side adapt to fast emerging regulations such as BMR and the Market Abuse Regulation (MAR), RIMES is developing a range of RegTech solutions that will provide regulatory compliance tools and expertise as a managed services. This approach will ensure that no firm falls foul of new regulations, while reducing the overall cost of compliance compared to in-house alternatives.
Additionally, RIMES has put together an easy to use BMR Checklist questionnaire for you to understand how you may be affected by the BMR.
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