|EU to supervise benchmarks regime
The European Commission unveiled plans to closely regulate key financial benchmarks used globally to price loans after a rate-rigging scandal blew the lid off the clubby world of banking.
“Today's proposals will ensure for the first time that all benchmark providers have to be authorized and supervised; they will enhance transparency and tackle conflicts of interest,'' EU Financial Markets Commissioner Michel Barnier said.
The measures cover not only the scandal-hit Libor, the flagship London reference rate used all over the world to set the rate banks, businesses and individuals pay to borrow money, but also “a broad variety'' of benchmarks used in commodity, energy and derivatives markets, AFP reports.
Crucially, the plans brings central supervision to a system that until now was largely run and supervised by the banks themselves.
The most used benchmarks, Libor and its euro zone equivalent Euribor, will be overseen by national administrators working in tandem with the Paris-based European Securities and Markets Authority.
Barnier said that until now benchmarks “have been largely unregulated and unsupervised.’’
The insular world of Libor imploded in 2012, undermined by revelations that major banks, among them Barclays, Royal Bank of Scotland and UBS, had manipulated Libor to their advantage, especially during the turmoil and aftermath of the 2008 global financial crisis.
Under Barnier's plans, which have to be approved by the 28 EU member states and the European Parliament, benchmark rates “will be subject to prior authorization and on-going supervision at national and European level.''
They would also require that the information used to calculate a benchmark was indeed accurate, reflecting the true cost of money in the market.