The European Central Bank (ECB) has published an opinion on the European Commission’s proposed Regulation on indices used as benchmarks in financial instruments and financial contracts (the Benchmark Regulation). The ECB has published its opinion in response to requests to do so from the Council of the EU and the European Parliament. The opinion discusses the purpose of the proposed Regulation and then sets out general and specific observations on the proposals. In its general observations, the ECB supports the proposed Regulation and makes a few forward looking remarks on the reform of critical interest rate benchmarks. In particular, it states that while progress has been made in strengthening the governance process and restoring credibility, further steps need to be taken. The ECB strongly supports market initiatives that aim at identifying transaction-based reference rates that could constitute viable complements or substitutes to Euribor and support facilitating market choices in a changing financial system so that users can choose reference rates which better match their needs. In addition, the design of new reference rates needs to consider the sound principles for reference rates put forward by the European Securities and Markets Authority, the European Banking Authority and the International Organisation of Securities Commissions.
The ECB’s specific observations cover the following areas:
- scope of the proposed Regulation;
- exclusion of indices and benchmarks provided by central banks;
- definition of “interbank interest rate benchmark”;
- benchmark integrity and reliability and the authorisation and supervision of administrators;
- sectoral requirements, critical benchmarks and mandatory contribution;
- supervisory co-operation;
- transparency and consumer protection; and
- use of benchmarks provided by third country administrators.