UK: EU Benchmark Regulation: Are You Ready For Implementation?

The European Commission's Regulation on indices used as financial benchmarks in financial instruments and financial contracts (the Regulation) forms part of the EU's response to a series of high profile investigations in recent years into the alleged manipulation of key financial benchmarks, including LIBOR. These investigations raised concerns over the reliability and integrity of financial benchmarks, which underpin transactions worth trillions of dollars. The Regulation aims to reduce the risk of manipulation, bolster the reliability of benchmarks administered and ultimately provide a safer environment for the use of benchmarks in the EU.

Timeline and Transitional Arrangements

On 1 January 2018, the Regulation will apply in which gives less than twelve months for entities that are either benchmark administrators, contributors or users to prepare for compliance with the requirements of the Regulation, subject to transitional arrangements.

Transitional arrangements will apply to "existing" benchmarks. This means EU benchmark administrators providing benchmarks up to 1 January 2018 will have until 1 January 2020 to apply to their EU national competent authority (NCA) for authorisation or registration.

However, the treatment of "new" benchmarks, i.e. those created by a benchmark administrator after 1 January 2018, remains unclear in the Regulation. This poses a challenge as to the level of implementation firms are seeking to achieve by the end of 2017.

Entities impacted by the Regulation (including those within and beyond the financial services industry), should remain prudent in their implementation plans by assuming the transitional arrangements will not apply to "new" benchmarks. This would mean administrators will only be able to administer new benchmarks in 2018 when they are authorised or registered by an EU NCA.

A summary of key milestones and expected activities over this year and beyond is shown below:

Level 2 Regulatory Technical Standards (RTS)

ESMA is expected to issue a final draft (for adoption) RTS on the Regulation to the Commission in early April 2017 which will give further guidance on a number of key focus areas of application of the Regulation, such as templates for benchmark and compliance statements.

However as part of the legislative process, it is worth noting that the Commission may choose to make some changes to the text before adopting it. Once the Commission has adopted the text, it will be submitted to the EU Parliament and Council and they will have three months to raise objections (although this period may be extended). Should no objections be raised, the text will be final and will be entered into the Official Journal of the EU. Thus, the full set of final requirements may only be available shortly before 1 January 2018.

Applications to EU national competent authorities

ESMA's Level 2 RTS will include further guidance on the specific information required in the application forms for the assessment for authorisation and/or registration. Hence once the final standards are published, the baton is passed to delegated EU NCAs to publish their own consultation papers for guidance on applications, likely to be in Q4 2017, and hence we may see a "rush to the finish" with a large influx of applications being submitted at the tail end of 2017.

It is also worth noting that the Regulation is still unclear on the level of compliance of the Regulation needed during the period between application and authorisation/registration. However we would expect the Regulation to allow administrators to continue the provision of benchmarks until the decision is made or at least to have some form of interim permission. In addition, the Regulation allows for administrators to apply within 30 working days of any agreement entered into by a supervised entity to use the benchmark. This means that administrators have up to mid-February 2018 to be able to apply assuming they would want to continue administering these benchmarks come 1 January 2018. However we would advise firms not to leave their applications to the last minute.

Assurance requirements

Further to existing benchmark regulation and guidance, the Regulation includes a variety of assurance requirements which firms who are impacted by the Regulation should consider as part of their implementation plans. These include:

  • Critical benchmarks require annual external audits
  • Commodity benchmarks require annual external audits
  • Interest Rate benchmarks require external audits every two years starting after 6 months of the code of conduct being issued
  • Third country administrators under Recognition need either an external audit or competent authority certification on their compliance of IOSCO principles (where required)
  • Administrators require reviews of contributors' adherence to the code of conduct
  • Benchmark methodologies and input data require internal reviews

Thematic Areas of Focus for firms' implementation plans

  1. Governance: Effective Arrangements and Proportionality

The Regulation sets out a wide-range of requirements on governance and oversight arrangements, managing conflicts of interest, accountability and control frameworks, input data and benchmark methodologies and transparency. As a further complexity, these requirements will differ depending on the type and criticality of the benchmark and hence firms are encouraged to have an inventory of benchmarks with a robust process to be able to identify the requirements for each of their benchmark activities.

The Regulation sets out the minimum standards of compliance that firms need to meet and depending on business set up and/or client needs, firms can choose to go above and beyond to establish control framework(s) proportionally to meet the Regulation standards across the organisation. Nevertheless, firms need to prove to their EU NCA that they comply with the Regulation as an organisation.

  1. Inventory: Define your in-scope benchmarks

Whether firms are users, contributors or administrators, the need for firms to develop an all-encompassing "live" inventory of benchmarks and to develop a control framework to maintain the inventory in line with the Regulation is important in establishing the perimeter of the application of the Regulation. The Regulation sets out various definitions and classifications which determine the requirements for each benchmark identified and thus we see as a minimum for the inventory to include information such as criticality, benchmark type, location of administration, contributor relationships and the use of benchmarks.

We also draw attention to the fact that the Regulation imposes requirements on supervised entities that are users of benchmarks. Not only do users now need to identify in-scope benchmarks being used across the organisation, users would also need to check regularly that the administrator is on the ESMA register with a benchmark statement published for each of their benchmarks. We would also encourage firms to begin thinking of contingency plans given the possibility for benchmarks to be discontinued or restricted to be used in the EU due to the Regulation.

  1. Third Country: The Regime and UK's planned exit from the EU

There are three options available under the third country regime and each option ultimately requires non-EU administrators to comply with requirements equivalent to the Regulation (IOSCO Principles for Financial Benchmarks and Oil Price Reporting Agencies). Although this provides some flexibility for non-EU firms to apply proportionality to their governance and control framework, the level of awareness of the Regulation by third country administrators with a limited presence in the EU will be a challenge, both in terms of the cost of meeting the requirements of the Regulation, and the feasibility in amending business strategies and models to ensure compliance with the Regulation.

It is worth noting that even with UK's planned exit from the EU, the Regulation will still apply in the UK before the earliest possible date for UK's exit from the EU. Thus, we would encourage firms in the UK to continue preparing for implementation of control frameworks to comply with the Regulation as an EU country. Furthermore, it may be seen as a competitive advantage to be an authorised or registered third country benchmark administrator living up to the standards of the Regulation, particularly if the UK regime is not deemed to be equivalent.


Given that 1 January 2018 is fast approaching, and in light of the highlighted complexities and uncertainties of the Regulation, we see the pressing need for firms to identify decisively the perimeter of impact of the Regulation, design plans for implementation, formulate a communication strategy with clients on any potential impact and start to prepare for application to EU NCAs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Shearman & Sterling LLP
Shearman & Sterling LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Shearman & Sterling LLP
Shearman & Sterling LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions