On 17 October 2023, the European Commission (Commission) published a proposal for a review of the European Benchmarks Regulation (BMR). The proposal is part of the Commission’s broader package of measures that seeks to rationalise reporting requirements for companies across various pieces of European financial services legislation. The Commission acknowledged that the current scope of the BMR is extremely broad, with nearly 90% of benchmark administrators authorised or registered in the EU providing only non-significant benchmarks. In respect of third-country benchmarks, the Commission noted that currently only 5% of those identified third-country benchmark administrators have used one of the available routes (equivalence, recognition or endorsement) to obtain a licence under the BMR, i.e. they do not rely on transitional provisions that are otherwise still applicable.
In the light of the above, the Commission proposed the following:
- Scope of BMR: the Commission proposes to reduce the scope of the BMR to cover only significant and critical benchmarks, together with EU Climate Transition and EU Paris-aligned Benchmarks. The Commission proposes to establish two mechanisms to identify significant benchmarks: (a) a threshold-based approach and (b) a designation regime. Administrators of non-significant benchmarks would no longer be subject to registration requirements. In the light of this proposed narrowing down of the scope of the BMR, the Commission proposes to remove the current specific exemption regime for spot foreign exchange benchmarks.
- Providing EU Climate Transition and EU Paris-aligned Benchmarks: the Commission clarifies that only those administrators who are authorised or registered in accordance with the BMR will be allowed to provide EU Climate Transition Benchmarks or Paris-aligned Benchmarks. Also, noting that the date (1 January 2022) by which administrators of significant benchmarks were required to “endeavour to provide” EU Climate Transition and EU Paris-aligned Benchmarks has passed, the Commission proposes to delete this BMR requirement.
- Threshold-based criteria for assessing when benchmarks are significant: in accordance with the Commission’s proposal, the benchmark will be considered as significant when it is used directly or indirectly within a combination of benchmarks within the Union as a reference for financial instruments or financial contracts or for measuring the performance of investment funds, that have a total average value of at least EUR 50 billion on the basis of all the range of maturities or tenors of the benchmark, where applicable, over a period of six months. Benchmark administrators will be required to notify the Member State competent authority (NCA) concerned or the European Securities and Markets Authority (ESMA), depending on where that administrator is located, that the aggregate use of one of their benchmarks has exceeded the threshold laid down in the BMR.
- Designation of significant benchmarks: the NCA where a benchmark is provided by an EU administrator, should be able to designate such a benchmark as significant on the basis of a set of qualitative criteria prescribed in the BMR. In respect of third-country benchmark administrators, it should be ESMA that designates such a benchmark as a significant benchmark, upon request of one or more NCAs.
- Use of benchmarks and publication of warning notes: the Commission proposes to provide NCAs and ESMA with a competence to issue a warning under the form of a public notice that the administrator of a significant benchmark does not comply with the applicable requirements, in particular as regards compliance with the obligation for the benchmark administrator to be authorised, registered, endorsed or recognised, as applicable. Issuance of such a warning would mean that supervised entities should no longer be able to add new references to such benchmarks or combination of benchmarks. Supervised entities will be required to consult the European Single Access Point or the ESMA register to verify the regulatory status of the administrators of significant benchmarks, EU Climate Transition Benchmarks or EU Paris-Aligned Benchmarks they intend to use.
- Recognition of third-country benchmark administrators: noting that the equivalence regime under the BMR covers a very limited number of third-country benchmarks, the Commission proposes to make the recognition regime for third-country administrators that will be required to obtain an EU licence, a permanent solution.
- Transitional provisions: the Commission proposes that NCAs and ESMA should provide less burdensome application procedures for administrators that are already authorised, registered, endorsed or recognised and that apply for a new authorisation, registration, endorsement or recognition within two years from the date of application of the revised BMR.
This proposal will now be subject to review by the European Parliament and by the Council. Once formally adopted, the revised BMR is proposed to apply from 1 January 2026.