On 22 July 2020, HM Treasury issued a policy paper explaining the government’s rationale for extending the transitional period for third country benchmarks under the UK Benchmarks Regulation to 31 December 2025.

The EU Benchmarks Regulation (BMR) has directly applied in the UK since 1 January 2018. To ensure that the existing regime continues to operate effectively following EU exit, the UK made amendments to the BMR to address deficiencies through the Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019. The BMR as amended will become retained EU law (UK Benchmarks Regulation) and will take effect in the UK at the end of the transition period.

In September 2019, the UK extended the transitional period for third country benchmarks from end-2019 to end-2022 through the Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 to provide additional time for third country benchmark administrators to apply to the FCA.

However, as of June 2020, only a limited number of third country benchmarks or administrators have come through the BMR access routes. To date, the European Commission has adopted two equivalence decisions pertaining to three financial benchmarks administered in Australia and Singapore. These are directly applicable in the UK and will continue to apply at the end of the transition period as a part of the UK’s onshored equivalence framework.

HM Treasury considers that the additional time to December 2022 will not be sufficient and resolve concerns and ensure that UK markets continue to have access to third country benchmarks. This is problematic, especially where there are few alternatives to replace third country benchmarks in the UK. Losing access to these benchmarks could have serious repercussions given their widespread use by UK firms for risk management, treasury financing and overseas investment.