European financial regulators published a final report Thursday setting out new principles for the operation of financial benchmarks, such as the London Interbank Offered Rate (LIBOR), in the wake of the benchmark rate rigging scandal.
The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) published a report establishing principles designed to address the problems identified with benchmark-setting processes. They say they have co-ordinated their work with current initiatives underway at the international level and have worked toward aligning them with the principles being developed by the International Organization of Securities Commissions (IOSCO).
The regulators say the principles will “provide benchmark users, administrators, calculation agents, publishers and data submitters with a common framework for carrying out these activities”. And, they suggest the principles will also help the transition to any potential future EU legal framework for benchmarks.
The ESMA and the EBA say it’s important that these principles are implemented by all market participants, “with the aim of reinforcing the robustness of the procedures, ensuring transparency to the public and creating a level-playing field, and also by supervisory authorities in their supervisory practices…”
“The final principles now give clarity to benchmark providers and users in the European Union about what is expected of them when engaged in this critical market activity,” said Steven Maijoor, ESMA chair. “These principles reflect the wider work being carried out on benchmarks and their immediate adoption will help restore confidence in financial benchmarks and prepare the way for future legislative change.”
The regulators intend review the application of the principles after 18 months, and note that they will continue further work on possible transaction-based alternatives.