Our work

Benchmarks

The Benchmarks workstream was tasked with steering the IRSG's response to the European Commission's proposed Regulation on Benchmarks. 

The IRSG broadly welcomes the aims of the proposed regulation to ensure that benchmarks are robust and reliable in order to restore confidence in financial markets, in particular the need to ensure high standards of effective governance, methodology and transparency. However, the role of of benchmarks in helping to enable investment and growth should be recognised, as well as the fact that benchmarks are global and therefore EU rules in this area must be fully compliant with IOSCO principles to ensure a level playing field globally.

Our work focuses on the following 3 areas:

  • Scope
  • Proportionality
  • Third country benchmarks

broadly welcomes the aim of the European Commission to ensure benchmarks are robust and reliable in order to restore confidence in benchmarks and ensuring a level playing field for all market participants and end-users. A number of recent events have highlighted the shortcomings in the benchmark process, in particular the potential for conflicts of interests to arise, and we support moves to address these weaknesses in the system. We agree that index providers should uphold standards of effective governance, clear methodology and transparency.

However, the role of benchmarks in helping to enable investment and growth should be recognised. Restoring market confidence is not an end in itself but a means to help investors make informed and transparent choices leading to more efficient capital allocation. That means supporting a competitive and innovative benchmark sector. Regulation should enable innovation in benchmark design to increase choice and meet evolving user demands (for example environmental, social or SME investment).

The regulation must also recognise that benchmarks are global and therefore the Regulation must be fully compliant with IOSCO principles to ensure a level playing field globally.

In this regard, we do have some specific concerns regarding the scope of the proposals, the use of proportionality and the treatment of third countries.

More details on the IRSG position can be found in the IRSG's position paper:

IRSG briefing paper on EU Benchmarks Regulation

IRSG briefing paper on EU Benchmarks Regulation and third country provisions

Background

Following the discovery that key benchmarks such as LIBOR and EURIBOR had been manipulated, the European Commission published a proposal to regulate benchmarks and indices in September 2013. The proposal aims to improve the governance and controls governing the benchmark process, and to improve the quality of data and methodologies used to calculate benchmarks.