Brussels, 24/01/2014 (Agence Europe) - It became clear on Thursday 23 January, after the Greek Presidency outlined its Ecofin priorities, that some subjects will not reach agreement during the current European Parliament, such as the draft regulation to boost governance for financial benchmarks. The legislation was unveiled by the European Commission in September 2013 after the scandals surrounding the LIBOR and EURIBOR inter-bank lending benchmarks (see EUROPE 10923).
Sharon Bowles (ADLE, United Kingdom) told MEPs on the European Parliament's economic and monetary affairs committee that she chairs that the question would not be discussed by EU28 finance ministers until mid-February and it would be therefore virtually impossible to start trialogue meetings before the European elections in May. She said it would be useful, however, for the Council of Ministers to be given the EP's position. The committee vote on the issue has been postponed until 17 February, but she said that MEPs were broadly on the same wavelength on the matter.
Scope of application. Bowles has restricted the Commission's ambitions by reducing the legislation's scope to the managers of “critical” benchmarks relating to commodities and those that the competent authorities may decide to include. On behalf of the EPP, Ireland's Gay Mitchell backed the rapporteur's approach, pointing out that this was a fundamental aspect of the legislation and would impact on all future legislation too. Emilie Turunen (S&D, Denmark) said she was concerned about the number of amendments limiting the scope of the regulation, regretting that they did not sweep as wide as the Commission's proposal, although she said this was not an irreconcilable difference. The scope is still too wide for the Conservatives, and Ivo Strejcek (ECR, Czech Republic), speaking for his British colleague Syed Kamall, said that the legislation should instead target the vulnerable benchmarks or those crucial for the stability of the financial system in Europe. The European Commission was asked to contribute to the debate and said that the scope of its proposal was based in the rules in force at the International Organisation of Securities Commissions (IOSCO), and the Commission had decided on this because various assessments had revealed that all benchmarks are vulnerable and all have weaknesses so a high level of regulation is required. Werner Langen (EPP, Germany) expressed doubts about application of the new rules to commodities. Alongside the rules on the management of benchmarks, Bowles said research was needed into how to deal with organisations that provide information to the benchmark management bodies.
Several associations representing journalists and publishers (ENAN, EBP, EFJ, EMMA, ENPA and EPC) expressed concern at how the regulation might impact on the freedom of the press and urged the MEPs to vote through amendments that would exempt the media from this legislation, as was done for the market abuse directive in 2003. They point out that, in its present format, financial news could well be covered by the regulation if it is used to form a benchmark, even if the reporter writing about the news is not aware of it.
Supervision. Sjrejcek explained that Kamall says that LIBOR has to remain in London, which has strengthened the governance rules for it. The European Securities Markets Authority (ESMA), which the Commission initially thought would supervise a number of benchmarks, should not be given too much extra work, he added. Mitchell said that ESMA should supervise crucial benchmarks which involve managers, supervisors and users in several member states, hence supervision by a single country would not be able to deal with all the risks involved. Philippe Lamberts (Greens/EFA) said benchmarks that can affect financial stability should be under the direct responsibility of ESMA or delegated to people who have the necessary resources and expertise. This needs to be discussed, he said. On the question of penalties, Sylvie Goulard (ADLE, France) called for administrative penalties in addition to criminal penalties.
Measures covering non-EU countries. Turunen called for contractual obligations on the question for non-EU countries, which should not be done using IOSCO rules because they are not binding enough. The European Commission feels it is important to have a system of establishing coherence among rules in force outside the EU because otherwise providers might leave the EU and set up in places where looser rules are in force. She added that markets must not be closed off and it must still be possible to use benchmarks drawn up outside the EU.
The legislation will come into force on year after its publication in the Official Journal. (EL/transl.fl)