As part of a package of measures aimed at reducing regulatory burden put forward on 17 October, the European Commission has proposed to reform the Benchmarks Regulation. Benchmarks are used across many sectors in financial services to measure things like the value of financial contracts or investment fund performance. An assessment carried out by the Commission over the summer revealed that no non-EU jurisdiction has opted for a scope as broad as the current EU Benchmark Regulation. This meant that EU rules would have significantly limited the number of non-EU benchmarks available for use in the European Union. The proposal consisted of reducing the regulatory burden by reforming the Benchmark Regulation. As an interim measure, the Commission has also extended the transitional period during which non-EU benchmarks will be allowed to be used until the end of 2025.

Reviewing the rules

During a speech at a Eurofi conference in September, Commissioner Mairead McGuinness said ‘We need to reform the rules for third-country benchmarks for good,’ adding that the EU will ‘reduce the number of third-country benchmarks that are included’ (in the regulation).

The Commission's proposal only covers benchmarks that are very important for EU markets. These "significant benchmarks" are those used for financial instruments or financial contracts or to measure the performance of investment funds with a value of at least €50 billion. This will ensure that EU benchmark users have enough benchmarks to use, reduce the burden on EU benchmark managers, and make the rules similar for EU and non-EU benchmark managers. This should guarantee a level playing field and avoid any competitive disadvantage for EU administrators. To this end, the scope of the Benchmarks Regulation for EU administrators will now only cover critical benchmarks, significant benchmarks, EU Climate Transition Benchmarks and EU Paris-Aligned Benchmarks.

Wider scope

The Benchmark Regulation was set up in the aftermath of the 2012 LIBOR scandal, in which banks were manipulating interest rates for their own benefit. It was the result of international efforts – coordinated by the International Organisation of Securities Commissions (IOSCO) – to regulate financial benchmarks. Unlike in other jurisdictions, the EU rules covered all benchmarks used here, no matter how big or small. Just like for EU benchmarks, the use of any non-EU country benchmark in the EU is regulated in the Benchmark Regulation.

The date of the entry into application of the Benchmark Regulation’s ‘third-country chapter’ has already been postponed twice. It is now set to apply as of 31 December 2025. So, this date represents a potential cliff edge for EU market participants, who may lose access to a significant number of vital benchmarks. The Commission’s proposal, therefore, is intended to offer a long-term solution and ensure the continued access to these benchmarks, while still maintaining a sufficient level of investor protection.

The proposal is now with the European Parliament and the Council for negotiations. The proposed date for the new rules to apply in all Member States is 1 January 2026.

Read more about benchmarks