Fresh from proposing amendments to its own draft regulation and directive on market abuse that would criminalise the manipulation of benchmarks, including LIBOR and EURIBOR, the Commission has today launched a consultation on “a possible framework for the regulation of the production and use of indices serving as benchmarks in financial and other contracts”. The Commission’s press releases is here, the consultation page is here and the consultation document is here.
From the press release:
“Following the recent manipulation of LIBOR, the Commission has today launched a consultation inviting stakeholders to comment on possible new rules for the production and use of indices serving as benchmarks in financial and other contracts.
Commissioner for Internal Market and Services Michel Barnier said: “The international investigations underway into the manipulation of LIBOR have revealed yet another example of unacceptable behaviour by banks. Doubts about the accuracy and integrity of indices can undermine market confidence, cause significant losses to consumers and investors, and distort the real economy. It is therefore essential that steps are taken to ensure the integrity of benchmarks and the benchmark-setting process. The Commission has already acted quickly to amend its legislative proposals on market abuse (see IP/12/846). However, changing the sanctions regime alone may not be sufficient: wider work is required to regulate how indices and benchmarks are compiled, produced and used.”
The consultation is wide-ranging: it covers all benchmarks, not just interest rate benchmarks such as LIBOR but also commodities and real estate price indices for example and it seeks to identify possible shortcomings at every stage in the production and use of benchmarks.
The ultimate objective is to ensure the integrity of benchmarks. All options are on the table but any solution should guarantee that benchmarks are not subject to conflicts of interest, reflect the economic reality that they are intended to measure and are used appropriately.
The consultation paper comprises 5 chapters covering:
- the scope, process and nature of indices and benchmarks
- governance and transparency in the use of actual transaction data
- the purpose and use of benchmarks
- the provision of benchmarks by private or public bodies, and
- the impact of potential regulation, including transition, continuity and international uses issues.”
The consultation closes on 15 November 2012.
More benchmark news here.