Brussels, 13/02/2015 (Agence Europe) - EU member states' permanent representatives drew up a negotiating position on Friday 13 February on the regulation to ensure greater integrity and accuracy for financial benchmarks. Three-way talks will begin when the European Parliament is ready.
The negotiating position is the sixth presented to the member states and contains a number of significant changes to the European Commission's proposals. The member states have extended the definition of 'critical benchmarks' in order to ensure that bodies that fail to meet the quantitative criteria, but which are of importance all the same to the EU, are subject to strict requirements. The third country measures have been amended to introduce a'grandfathering period' and to ensure that the rules achieve their aim without disturbing the market. Finally, the member states tried to strike a greater balance between the European Securities Markets Authority (ESMA) and national competent authorities.
The European Commission welcomed the Council's negotiating position, which should help ensure that taxpayers can be certain that benchmarks are subject to prior authorisation and ongoing surveillance, depending on the type of benchmark (for example, commodity benchmarks or interest rate benchmarks), improved governance, particularly management of conflicts of interest and guaranteeing supervision of key benchmarks such as EURIBOR and LIBOR. “The proposed regulation will ensure that we have benchmarks that are robust, reliable and representative,” said Jonathan Hill, European commissioner for financial stability, financial services and capital markets union.
The Council's document differs from that drawn up by the European Parliament rapporteur, Cora van Nieuwenhuizen (ALDE, the Netherlands) mainly over two issues: the definition of critical benchmarks and benchmark proportionality. The member states' document introduces a second quantitative criterion (covering funds worth at least €400 billion). The EP rapporteur's approach aims to be more flexible, leaving greater judgement in the hands of the supervisor. The rapporteur wants qualitative criteria to be introduced. On the question of proportionality, the rapporteur's document clearly distinguishes between the requirements for critical and non-critical benchmarks.
In a statement to this newsletter, Cora van Nieuwenhuizen explains that the Council's document “is more workable than the original Commission text, especially on the issue of how to deal with benchmarks produced in third countries. The Council text, however, does not deal sufficiently with the other important issue: proportionality. Treating the millions of benchmarks produced around the world every day as all essentially the same places unnecessary burdens on benchmark producers and contributors, as well as on supervisors. We should instead opt for a more targeted approach: imposing stringent regulations on the production of benchmarks of great importance to the financial system and the real economy, while focusing on enhancing transparency to users of benchmarks that lack such critical importance.” She hopes agreement will be reached at the EP over the next few weeks so that a three-way agreement can be reached before the summer. The Commission believes that such a timeline is doable. The draft legislation was unveiled in September 2013, before the LIBOR and EURIBOR scandals broke. (Elodie Lamer)