Brussels, 26/11/2015 (Agence Europe) - There are some outstanding points of a fairly technical nature still to be settled, over the next few days, to finalise the agreement reached during the evening of Tuesday 24 November in the interinstitutional negotiations on the proposed regulation to make benchmarks more reliable and harder to manipulate.
In the view of the EP, the most important point concerns the definition of commodity benchmarks. These benchmarks will be subject to a tailor-made annex which reflects the principles applicable to the assessment agency of oil prices (PRA) of the International Organisation of Securities Commissions (IOSCO). At the sixth trialogue meeting, the parties agreed on 'de minimis' exemption for commodities indexes below €100 million.
However, the EP feels that it is unclear what falls within the scope of the requirements of this annex and what falls under the rules applicable to benchmarks. For instance, gold comes within the scope of the commodity indexes. “Looking at how it is produced and used historically, I believe the gold benchmark should definitely fall under the financial benchmark rules”, Cora Van Nieuwenhuizen (ALDE, Netherlands), rapporteur on this dossier for the EP, explained to EUROPE. According to the Council's definition, this would be considered a commodity benchmark and therefore subject to rules “that cannot be applied”. “I think this is ridiculous and it must be solved. In the end, Parliament accepted the promise that Council and Commission will come up with a workable solution”, she said.
Germany is reported to be having problems moving on this point and it will be the responsibility of the Presidency to appease German concerns. At this stage, it is hard to say whether the solution will be specific to gold or more general. Over at the Parliament, it has been indicated that this definition could also cause problems the other way round, in other words that commodity benchmarks could be subjected to financial benchmark requirements.
Proportionality. One of the questions still outstanding at the start of this trialogue session was related to the principle of proportionality applied to significant indices (for which the reference value threshold remains set at €50 billion). Initially, the Presidency proposed a waiver regime for certain provisions, which would mean that these provisions would apply unless the competent national authority decided that this was unnecessary (see EUROPE 11422). The Parliament wanted to tackle the issue the other way round, so that these provisions would not apply unless the national authority decided the contrary. The Presidency therefore accepted the EP's approach and included an add-on regime to the text, whereby the provisions subject to proportionality would not apply in principle and the national authorities would have just an ex post role to decide to apply these articles after all. According to EP sources, the national authorities have to “prove” that the application of the provisions in question is necessary. The parties agreed, at the trialogue meeting before last, to remove from the provisions for this category of benchmarks the obligation to use an external auditor to assess the administrator's compliance statement. The Council initially backpedalled and called for it to be included in the text. The EP refused and, in line with what was agreed in late October, the obligation will not be in place for significant benchmarks.
Non-significant benchmarks, on the other hand, will fall under a light regulatory regime based on a comply-or-explain mechanism. The principles applicable to non-significant benchmarks are in line with the IOSCO's principles.
“The Parliament has always been in favour of a more proportionate approach to deal with the large number of benchmarks that would fall under the regulation. I am very pleased that the text recognises the difference between benchmarks: it fully regulated the important benchmarks and gives a lighter regime to smaller indices”, Van Nieuwenhuizen explained. It is worth noting that a number of exemptions are in place for indices based on regulated data, to which the proportionality regime applies.
Third countries. The agreement includes an equivalence, recognition and endorsement regime. The EP's approach provides for a partial equivalence regime, so as to facilitate equivalence with regard to third countries which do not intend in the foreseeable future to put in place a fully-fledged regime for all types of benchmarks, but which have put or may put in place specific rules for certain types of benchmarks or benchmark administrators.
“For Parliament it was crucial to ensure the many millions of benchmarks produced outside the EU could continue to be used in Europe. This compromise includes practical options for non-European benchmark producers to maintain access to the EU, including the option of showing compliance with the international standards for benchmarks, the IOSCO principles”, Van Nieuwenhuizen told us. The permanent representatives will approve the agreement on 9 December. (Original version in French by Elodie Lamer)