Inside this Topic Guide
Allegations and cases of benchmark manipulation which came to light across the globe in the late 2000s and during the 2010s resulted in enforcement action against firms and individuals and caused a number of governments and regulatory bodies to implement changes to the way benchmarks are set and administered. Globally, to improve benchmark integrity and to address declining liquidity in key interbank unsecured funding markets, there has been a move away from the use of interbank offered rates set by panel contributors, towards 'risk-free' rates based on market transactions (discussed further in our Topic Guide, IBOR transition and risk-free rates).
International: At the international level the International Organization of Securities Commissions (IOSCO) published Principles for Oil Price Reporting Agencies in December 2012 and its Final Report on Principles for Financial Benchmarks in July 2013, shortly after the Financial Stability Board established the Official Sector Steering Group of regulators and central banks to coordinate consistency of review of existing interest rate benchmarks.
EU Benchmarks Regulation: At an EU level, on 1 January 2018, the EU Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (Regulation (EU) 2016/1011) entered into full application, subject to certain transitional arrangements. The stated overall objective of the EU Regulation is to help restore confidence in the integrity of benchmarks by enhancing the robustness and reliability of benchmarks, facilitating the prevention and detection of their manipulation and clarifying responsibility for and the supervision of benchmarks by the authorities. It regulates the administration of, contribution to and use of a broad range of indices and replaces corresponding benchmark regulatory regimes previously in place in member states. Amendments to the EU Benchmarks Regulation seek to address challenges with amending tough legacy contracts for IBOR transition purposes.
See EU Benchmarks Regulation section below and our Client Briefing The new EU Benchmarks Regulation: What you need to know (September 2016) for more information. ESMA took over the supervision of critical benchmark administrators from 1 January 2022, under amendments introduced by Regulation (EU) 2019/2175. More recently, the European Commission completed a review of the functioning of the EU Benchmarks Regulation and published a legislative proposal with targeted amendments as part of its 2024 work programme.
United Kingdom: The UK has onshored the Benchmarks Regulation and implemented certain of its requirements through secondary legislation and regulatory rules. The Financial Services Act 2021 gives the Financial Conduct Authority (FCA) more powers to manage an orderly wind-down of critical benchmarks such as LIBOR. The Critical Benchmarks (References and Administrators' Liability) Act 2021 is intended to support the effective operation of the powers granted to the FCA under the Financial Services Act 2021. As part of the UK's post-Brexit regulatory reform programme, designed to deliver a 'Smarter Regulatory Framework' for the UK, the UK Government intends to repeal retained EU law including the UK Benchmarks Regulation (UK BMR), and replace its provisions with regulatory rules. Following its approach to revocation and reform in 'Tranches' of legislation, the government is prioritising work on Tranches 1 and 2 during 2023. The government has included the UK BMR in 'Tranche 3', and will be reviewing and consulting on potential reforms to it in 2024.
National: Outside the EU, jurisdictions have taken different approaches to the regulation of benchmarks. Some jurisdictions like Australia, Singapore, Japan and Korea have adopted regulatory reforms that target a few, specifically designated benchmarks. Others, like the USA, have preferred to achieve the objectives of the IOSCO Principles through more robust enforcement rather than new supervisory architecture.
|7 November 2023||Draft Financial Services and Markets Act 2023 (Benchmarks and Capital Requirements) (Amendment) Regulations 2023 laid before Parliament extending the transitional period for the third country benchmarks regime under the UK Benchmarks Regulation. The transitional period will be extended from 31 December 2025 to 31 December 2030. This will come into force on 1 January 2024.|
|23 October 2023||Commission Delegated Regulation (EU) 2023/2222, which extends the transition period of the BMR for third country benchmarks to 31 December 2025, is published in the Official Journal.|
|17 October 2023||EU Commission proposes a Regulation amending the Benchmarks Regulation as regards the scope of the rules for benchmarks, the use in the EU of benchmarks provided by an administrator located in a third country, and certain reporting requirement. Comments are due by 25 December 2023 | 2024 work programme | Press release | FAQs | Blackline showing proposed changes to current BMR|
|14 July 2023||EU Commission adopts Delegated Regulation extending transitional period for third country benchmarks until 31 December 2025 | Report | Webpage | Press release|
|16 December 2022||US Federal Reserve Board announces that it has adopted final implementing regulations under the Adjustable Interest Rate (LIBOR) Act.|
|10 March 2022||US federal Adjustable Interest Rate (LIBOR) Act approved by US Congress, included as Division U of the Consolidated Appropriations Act, 2022.|
|15 December 2021||UK Critical Benchmarks (References and Administrators' Liability) Bill receives Royal Assent.|
|22 October 2021||Commission Implementing Regulation (EU) 2021/1847 on the designation of a replacement for certain settings of CHF LIBOR and Commission Implementing Regulation (EU) 2021/1848 on the designation of a replacement for the benchmark EONIA are published in the Official Journal.|
|13 August 2021||Five Delegated Regulations setting out regulatory technical standards (RTS) under articles 4, 12, 14, 21 and 26 of the EU Benchmarks Regulation are published in the Official Journal. The Delegated Regulations entered into force on 2 September 2021 and apply from 1 January 2022.|
|24 June 2021||EU Commission, ECB Banking Supervision, EBA and ESMA publish joint statement encouraging market participants to cease all LIBOR settings.|
|29 April 2021||UK Financial Services Bill receives Royal Assent. The Financial Services Act 2021 amends the UK Benchmarks Regulation.|
|7 April 2021||New York State Governor Andrew Cuomo signs LIBOR legislation into law.|
|12 February 2021||Regulation (EU) 2021/168 (BMR Refit) regarding the exemption of certain third-country spot foreign exchange benchmarks and the designation of replacements for certain benchmarks in cessation, and amending Regulation (EU) No 648/2012 published in the OJ. The Regulation makes various amendments to the EU Benchmarks Regulation, with the intention of reducing the disruption caused by the phasing out of various widely-used benchmarks scheduled to happen in 2021. The Regulation also extends the transitional period under which benchmarks administered in third countries can continue to be used from 31 December 2021 to 31 December 2023.|
|27 December 2019||Regulation (EU) 2019/2175 amending the EU Benchmarks Regulation among others. Under these amendments, ESMA takes over the supervision of critical benchmark administrators from 1 January 2022.|
|9 December 2019||Regulation (EU) 2019/2089 regarding EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks published in the OJ. Among other things, it extends the transition regime for critical and third-country benchmarks until 31 December 2021.|
|30 July 2019||Commission Implementing Decisions on the equivalence of the legal and supervisory frameworks applicable to benchmarks in Singapore and in Australia, in accordance with the EU Benchmarks Regulation, are published in the Official Journal.|
|5 November 2018||Ten EU Commission Delegated Regulations supplementing the EU Benchmarks Regulation (EU 2016/1011) published in the Official Journal|
|13 July 2018||EU Commission endorsed Delegated Regulations under the EU Benchmarks Regulation.|
|10 November 2016||ESMA publishes report on technical advice for EU Benchmarks Regulation.|
|29 June 2016||EU Benchmarks Regulation (Regulation (EU) 2016/1011) is published in the Official Journal. The Regulation came into force on 30 June 2016.|