For many of us, New Year’s resolutions are the impetus needed to get around to doing things that, while virtuous, we’d rather not do – such as kicking a bad habit or doing more exercise. The same can hold true for businesses, with the New Year providing a great opportunity to take onerous tasks off the back burner and getting them finished. For many buy-side firms, one thing in particular will top their list of resolutions: achieving compliance with the EU Benchmarks Regulation (BMR). This is because as of January 1 this year, the regulation has come into full effect – there is simply no more time for delay.
Unlike with resolutions made in our personal lives, such as going to the gym more often, there are more compelling reasons to follow through on addressing BMR compliance. While a lapsed gym membership ultimately bothers no one, BMR compliance matters very much to those charged with policing it: the regulators. And it’s not only national competent authorities that firms need to worry about: the European Securities and Markets Authority (ESMA) continues to publish guidance and communications on BMR. This oversight means that firms will have little or no excuse for non-compliance when the regulators come knocking.
ESMA’s publications are also shining a light on just how large an impact BMR is going to have on investment managers’ businesses. Last month, for example, ESMA provided more information on which European benchmark administrators are now authorized under the regulation and which are pending authorization, as well as what the transitional arrangements are for critical and third country benchmarks.
With regards to the latter, the extension of transitional arrangements for a further two years for third country benchmarks seems to have lulled some firms into taking their foot off the regulatory peddle. Indeed, there’s growing awareness in Asian financial sector firms that BMR is a ticking timebomb for many administrators in the region, and that little has been done by firms to put contingencies in place. Some commentators have described a pending ‘benchmark-aggedon’ in that region, with the prospect that EU investors will leave the Asian markets in the absence of approved administrators.
Another challenge is that the BMR goalposts continue to shift. The regulation is still in flux with new tweaks, clarifications and amendments being made the whole time. For instance, just a few weeks ago the EU Commission published a regulation that amends BMR in the Official Journal of the European Union. The aim of the amendment is to introduce new requirements for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks. Already complex, such changes are making BMR a highly challenging regulation to navigate. The impact of Brexit will doubtless add further complications.
Simon Green, Head of Compliance at RIMES, comments: “The implementation deadline for BMR compliance has been a long time coming, but the sheer complexity and volatility of the regulation means that many firms have failed to get to grips with it. There’s no more time to delay and firms really do need to solve BMR compliance as a priority.
“The EU’s regulators are updating their systems to take account of the new benchmarks regime and it’s important firms have the very best systems in place to keep pace. RIMES RegFocus BMR Control provides a complete, cloud-based inventory management, enrichment and control platform that ensures every benchmark used by a firm is properly registered and administered under the BMR regime.
“Through the service, firms can audit their entire benchmarks universe to quickly understand their risk exposure and take appropriate action. What’s more, we provide a complete list of compliant, substitute benchmarks so firms are ready for cases of benchmark market withdrawal. RIMES can also provide firms with a data feed of benchmark authorization data for their internal use.
“New Year’s resolutions often fall by the wayside – but this need not be the case for BMR. We can do all the hard work for you to ensure that your BMR compliance goals are met rapidly and successfully.”
Contact us to receive more information about RIMES RegFocus℠ BMR Control, the most advanced benchmarks validation solution on the market, which solves all regulatory obligations under the new Benchmarks Regulation.
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