Many financial benchmarks have been reformed in the wake of the LIBOR market manipulation scandal, and that process is still underway, global regulators report.
The International Organization of Securities Commission (IOSCO) has published a review assessing the implementation of its principles for financial benchmarks, which were adopted after the LIBOR scandal. It sampled administrators of financial benchmarks across a range of geographical areas and asset classes and found “that there has been a significant market reaction to the publication of the principles, with widespread efforts being made to implement the principles by the majority of the administrators surveyed.”
The area where benchmark administrators have taken the most action relates to governance; however, it says that there has also been a significant amount of work to enhance the design and methodology of many benchmarks.
IOSCO says that administrators of equity benchmarks report the highest level of compliance with the principles. Whereas commodity and fixed income benchmarks report that under half are aligned with the principles. And, alternative benchmarks demonstrated lower levels of compliance as a group, it says.
The report also notes that the benchmarks industry is in “a state of change”, as many administrators are continuing to work towards compliance with the principles. Further reforms may be needed in the future, IOSCO says, noting that “it is too early to determine what those steps should be.”
“Benchmark administrators have taken significant steps to implement the principles across their business, however there is more to do to ensure standards are raised across the market. The principles play a vital role in this, and I welcome the public confirmations of compliance made by administrators to date,” said Martin Wheatley, chairman of the IOSCO task force on benchmarks and CEO of the UK Financial Conduct Authority (FCA).