At the end of last month, Luxembourg’s Chambre des Députés adopted the draft bill of law N°7164, implementing the EU’s Benchmarks Regulation (BMR). BMR was created by the EU to combat the manipulation of benchmarks and rates and establishes a stringent compliance and reporting regime for benchmark administrators, contributors and users. Luxembourg is the second EU member state to integrate BMR into national law, following the UK earlier this year.
Under the terms of Luxembourg’s new law, the Commission de Surveillance du Secteur Financier (CSSF) has been appointed as the National Competent Authority to authorize Benchmark administrators and supervised entities and ensure compliance with BMR’s stipulations. The Commissariat Aux Assurances (CAA), meanwhile, has been given the same function with regards to organizations under its supervision of the insurance sector. Luxembourg’s law empowers the CSSF and CAA to compel administrators to disclose information used in the determination of a benchmark, perform inspections and impose penalties for non-compliance.
As BMR takes root across Europe, benchmark administrators and users will need to overhaul their compliance systems and processes. This requirement comes at a time when compliance teams in financial sector firms are already stretched by emerging regulations including the Markets in Financial Instruments Directive (MiFID II) and the Market Abuse Regulation (MAR). While BMR includes a period of grace for benchmarks that were in existence prior to 30 June 2016, this only applies to benchmark administrators. Benchmark users need to act now to ensure the benchmarks they use in financial instruments and contracts are approved under BMR.
As firms come under pressure to meet the stipulations of BMR, and other emerging regulations, many will choose to take compliance systems and processes as a managed service from providers such as RIMES. This is because managed ‘RegTech’ services enable rapid compliance without the cost and disruption associated with comparable in-house modernization programs. Firms that adopt such an approach will therefore find they are at a competitive advantage: able to achieve their compliance imperatives rapidly without disrupting core business activities.
BMR and other regulatory topics will be discussed at RIMES’ upcoming EMEA Client Conference, which will take place in London on May 2. To register, email email@example.com.
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