On 20 May 2021, the FCA published Consultation Paper 21/15: Benchmarks Regulation: how we propose to use our powers over use of critical benchmarks (CP21/15).
In CP21/15 the FCA is seeking views on how it uses the following two new powers introduced through amendments to the Benchmarks Regulation (BMR) under the Financial Services Act 2021:
- Legacy use power. This power allows the FCA to designate a critical benchmark as an ‘Article 23A benchmark’ where it has become permanently unrepresentative of the market it is intended to measure and is in the process of being wound down. Designation as an Article 23A benchmark results in an automatic prohibition on the use of the benchmark by UK supervised entities except where the FCA permits it by exercising its legacy use power under Article 23C(2). Article 23C(2) permits the FCA to use the Article 23A benchmark for legacy use only, where doing so would advance one or both of the FCA’s consumer protection and integrity objectives. In chapter 2 of CP21/15 the FCA sets out its proposed policy for considering whether and how to exercise its legacy use power.
- New use restriction power. Under Article 21A of the BMR the FCA has the power to prohibit some or all new use of a critical benchmark when it has been notified by its administrator that it will cease to be provided. The FCA can only exercise its new use restriction power where it considers that doing so would advance either or both of its consumer protection and integrity objectives. In chapter 3 of CP21/15 the FCA considers consumer protection and integrity risks.
The deadline for comments on CP21/15 is 17 June 2021.
Following the consultation the FCA plans to publish a Statement of Policy and Feedback Statement in Q3 2021.