11 January 2013
The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have today published the results of their joint work on Euribor and propose principles for benchmark rate-setting processes. The publications include:
Steven Maijoor, ESMA Chair, said:
"The proposed Principles, which are aligned with on-going EU and international work, will give clarity to benchmark providers and users, and are an immediate step to be taken in advance of potential wider changes in the supervisory and regulatory framework for financial benchmarks."
Andrea Enria, EBA Chair, said:
"ESMA and the EBA are convinced that the prompt and full implementation of today's recommendations is an important step towards ensuring that Euribor represents a transparent and reliable benchmark for financial transactions within the European Union."
Findings & Recommendations
ESMA and the EBA have identified significant weaknesses and insufficiencies in the governance of the Euribor rate-setting mechanism and have made a number of recommendations to EEBF. These are aimed at improving the governance of the rate-setting process, which would contribute to a transparent and reliable benchmark for financial transactions. The recommendations are made within the current legislative setting, while the need for broader structural changes is being assessed by the European Commission.
The work carried out by ESMA and the EBA focuses on the governance aspects of the Euribor rate setting mechanism and complements the current legal investigations related to Euribor being conducted by competent authorities within the EU, without pre-empting their final outcome.
The main weaknesses and insufficiencies in the current rate-setting process are the following:
ESMA and the EBA have made a number of recommendations aimed at addressing the current weaknesses and insufficiencies in the Euribor rate-setting process. ESMA and the EBA are calling for a prompt and full implementation of these recommendations to ensure Euribor is a reliable benchmark for financial transactions. These are:
ESMA and the EBA will review the implementation of these recommendations by EEBF within six months.
EBA Recommendations on Supervisory Oversight of activities related to banks' participation in the Euribor panel
To ensure appropriate internal governance processes are also in place within the banks participating in the Euribor panel, the EBA adopted a set of formal Recommendations addressed to national supervisory authorities aiming at setting consistent supervisory practices for the oversight of the Euribor submission process.
The Recommendations focus on strengthening the panel banks' internal governance arrangements, including a code of conduct. This should improve the identification and management of conflicts of interest, internal control arrangements including audits, record keeping and comparison with actual transactions.
Consultation on Principles for Benchmark Setting Processes in the EU
In response to concerns regarding the perceived weaknesses in current arrangements for benchmark rate-setting, ESMA and the EBA have also developed a set of Principles to address the activities of reference-rate and other benchmark providers, administrators, publishers and market participants who submit data.
The Principles are designed as a first step towards a potential formal regulatory and supervisory framework for benchmarks to be developed in the EU and also take into account other international efforts in this field.
The proposed Principles include a general framework for benchmarks settings (calculation methodology, governance, supervision, transparency of the methodology, contingency plans, etc.). They also provide guidance to firms involved in benchmark data submissions and to benchmark administrators, calculation agents, publishers and users.
The deadline for submission of responses to this consultation is 15 February 2013.
Notes for editors
1. ESMA is an independent EU Authority that was established on 1 January 2011 and works closely with the other European Supervisory Authorities responsible for banking (EBA), and insurance and occupational pensions (EIOPA), and the European Systemic Risk Board (ESRB).
2. ESMA's mission is to enhance the protection of investors and promote stable and well-functioning financial markets in the European Union (EU). As an independent institution, ESMA achieves this aim by building a single rule book for EU financial markets and ensuring its consistent application across the EU. ESMA contributes to the regulation of financial services firms with a pan-European reach, either through direct supervision or through the active co-ordination of national supervisory activity.
3. The EBA is an independent EU Authority established on 1 January 2011. As part of the European System of Financial Supervision, it works closely with the other European Supervisory Authorities responsible for market (ESMA), insurance and occupational pensions (EIOPA), and the European Systemic Risk Board (ESRB).The EBA has a broad remitin the areas of banking, payments and e-money regulation, as well as on issues related to corporate governance, auditing and financial reporting. Its tasks include preventing regulatory arbitrage, guaranteeing a level playing field (especially by building a single rule book for the European banking system) strengthening international supervisory coordination, promoting supervisory convergence and providing advice to EU institutions.
Franca Rosa Congiu