The European Parliament’s Committee on Economic and Monetary Affairs (ECON) approved on Thursday 19 November, with 49 votes in favour and 10 abstentions, the draft report by Caroline Nagtegaal (Renew Europe, the Netherlands) on the legislative proposal that seeks to ensure that the discontinuation of a widely used financial benchmark does not undermine the financial stability of the EU (see EUROPE 12535/14).
In the immediate term, the aim is to prepare, from the end of 2021, for the disappearance of LIBOR (London Interbank Offered Rate), an interbank standard rate on the London market that serves as the basis for indexing thousands of financial contracts.
EU rules do indeed allow the supervisors of certain widely used benchmarks to prevent their abrupt cessation. However, they do not address the termination of a so-called “critical benchmark”, such as LIBOR.
The vote was conducted without surprises, and all the compromise amendments negotiated beforehand between the political groups were adopted. Overall, the final text does not change the substance of the Commission’s proposal, but provides some clarifications on the scope and conditions for the exercise of the Commission’s powers to designate a replacement index.
The MEPs’ text specifies in particular that the proposal applies to contracts or financial instruments listed in the MiFID II Directive and to contracts that are subject to the law of non-Member States, if these do not make provision for the termination of the application of the benchmark.
In her initial draft report, the rapporteur wanted the proposal to apply only to critical interest rate benchmarks, such as LIBOR, but the political groups eventually decided that the proposal should cover not only “critical benchmarks”, but also all benchmarks whose discontinuation could cause financial or economic problems, whether or not they were classified as “critical”.
In addition, the final text sets out a stricter framework for the Commission’s powers, providing for public consultations and consultation with the European Securities and Markets Authority (ESMA) before designating an alternative benchmark.
On the same day, MEPs backed the mandate (49 votes in favour, three against, seven abstentions) to start interinstitutional negotiations with the Council of the EU (see EUROPE 12575/7).
According to our information, the first trilogue could take place as early as 25 November, and an agreement could already be reached by that date, since the modification of the European regulation must be adopted by the end of the year. (Original version in French by Marion Fontana)