The International Organisation of Securities Commissions (IOSCO) has published a report (the Review) following its second review of the implementation of its Principles for Financial Benchmarks (the Principles) by administrators of the London Interbank Offered Rate (LIBOR), the Euro Interbank Offered Rate (EURIBOR) and the Tokyo Interbank Offered Rate (TIBOR), collectively referred to as the IBOR’s.
The Review considers the degree to which the IBOR’s have complied with the Principles, which were published in July 2013. This report is a follow-up to IOSCO’s Review of the administrators of the IBORs (First Review) which was published in July 2014. The First Review contained remedial recommendations for the three administrators intended to strengthen their implementation of the Principles.
The Review investigates the direction of travel taken by the administrators towards implementing the recommendations of the First Review. IOSCO found that, there was an important distinction between the level of progress made in implementing the Principles related to the quality of the benchmark and other Principles which deal with governance, transparency and accountability.
In regard to the Principles related to governance, transparency and accountability, the Review found that the majority of the recommendations made by the First Review had been implemented by the administrators. While there was further work identified, this related to only a limited number of points which were specific to certain administrators.
Additionally, IOSCO saw evidence that all the administrators had developed and improved their policies and procedures in a number of areas including conflicts of interest, consultation with stakeholders and internal oversight.
Areas where further work was identified, in respect of one or more of the administrators, included ensuring that conflict of interest policies were applicable to all relevant individuals and publishing sufficient information around the functioning of the Oversight Committee, or equivalent body.
All three administrators are in the process of conducting work in this area, including data collection exercises, round tables and public consultations, to develop and engage with stakeholders on approaches to evolve the three benchmarks to better anchor them in market transactions.
The Review stresses, however, that for the most part this work is still at the stage of planning and consulting on how the design of the benchmarks can be improved, to better anchor the benchmark in market transactions. As such, the level of implementation of the relevant Principles will depend on the final outcome of the planned work, rather than the plans themselves.
The Review Team has made recommendations for each administrator in order to strengthen the implementation of the Principles. IOSCO expects administrators to take decisive steps, as soon as possible, to implement the recommendations. It does not anticipate another review but recommends that relevant national authorities should monitor the progress made by the three administrators to implement the recommendations of the Review.
The Review is available here.
The IOSCO Principles for Financial Benchmarks Final Report (July 2013) is available here.
For further information, please contact us.