On 23 May 2022, the European Commission (Commission) launched a targeted consultation on the regime applicable to the use of benchmarks administered in a third country . The Commission takes note of the fact that the current regime for third-country benchmarks, as set out under the European Benchmark Regulation (BMR), is set to expire on 31 December 2023. The purpose of the ongoing consultation is to gather stakeholders’ feedback on the expected effect of the new regime on European users of benchmarks, with a view of using input obtained to develop a legislative proposal reviewing the rules for financial benchmarks administered outside the EU. The Commission expects to publish the legislative proposal in Q4 2022.
The consultation questionnaire is divided into five main parts:
(1) Questions specific to benchmark administrators
Under this first section, the Commission seeks views of EU benchmark administrators to what extent they experience competition from benchmarks administered outside the EU. It also asks third-country benchmark providers whether they intend to change their status by 31 December 2023, also to provide an estimation of the costs incurred to seek compliance with the BMR’s third country regime. The Commission is also interested to know if the overall costs for compliance with the third-country regime acts as a deterrent for third-country entities to seek an EU license.
(2) Questions specific to supervised entities using benchmarks
Under this section, the Commission seeks supervised entities’ views – among other issues – to what extent they rely on third-country benchmarks, to provide (if available) notional amount / value of such exposures per type of use. It also seeks views whereby the supervised entities consider that the third-country benchmarks they currently use will obtain any of the available licenses by 31 December 2023 (equivalence, recognition, endorsement) and asks for estimation of the impact of the entry into application of the rules on third country benchmarks in the BMR on the supervised entities’ activities (costs / revenues).
(3) Questions specific to end-users of benchmarks
Under this section, the Commission seeks views – among other issues – to what extent the organisations’ activities rely on third-country benchmarks, and for which purposes, and if they consider any mitigation measures in case a third-country benchmark will become unavailable.
(4) Questions specific to “other” respondents
Under this section, the Commission seeks input on the estimation of the impact of the entry into application of the rules on third country benchmarks in the BMR on the respondents’ activities. If available and relevant it asks for notional amounts / values of exposures to third-country benchmarks.
(5) Questions to all types of respondents
Under this section, the Commission seeks stakeholders’ views on – among other issues – a question whether the rules applicable to the use of benchmarks administered in a third country are fully fit-for purpose, and if not, how they should be amended. In this context, the Commission considers a solution whereby only certain third country benchmarks, deemed ‘strategic’, would remain subject to restrictions of use similar to the current rules. In respect of the sustainability issues, the Commission questions whether creating an EU ESG benchmark label would help enhance the quality of ESG benchmarks.
The consultation is open until 12 August 2022.