IOSCO urges implementation of principles for financial benchmarks

“IOSCO believes these principles provide a solid framework to ensure the quality, integrity, continuity and reliability of benchmarks, and therefore encourages administrators to take all the necessary measures to comply with them and provide the public disclosure,” it says in its communique.

It also stresses that it’s committed to restoring the credibility and integrity of financial benchmarks in the wake of the LIBOR scandal that continues to unfold. It notes that the scandal has raised concerns over the fragility of certain benchmarks that could undermine market confidence, potentially harming both investors and the real economy.

“The principles should be understood as a set of recommended practices that should be implemented by benchmark administrators and submitters,” it says, noting that they address governance issues, benchmark quality, the quality of the methodology, and accountability mechanisms.

IOSCO says it does not expect one-size-fits-all implementation to achieve the principles’ objectives. “In particular, the application and implementation of the principles should be proportional to the size and risks posed by each benchmark and/or administrator and the benchmark-setting process,” it says; adding that its principles have been endorsed by the G20 and the Financial Stability Board (FSB).

IOSCO intends to review the extent to which the principles have been implemented within 18-months from their initial publication (in July 2013).