32 Financial services: benchmarks
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
|
| Document details | Proposed Regulation on benchmarks used in the financial services sector
|
| Legal base | Article 114 TFEU; ordinary legislative procedure; QMV
|
| Department | HM Treasury
|
| Document Numbers | (35328), 13985/13 + ADDs 1-2, COM(13) 641
|
Summary and Committee's conclusions
32.1 This proposed Regulation concerns indices used as benchmarks
in financial instruments, financial contracts or to measure the
performance of investment funds. It seeks to improve governance
of the benchmark process, prevent conflict of interests of benchmark
administrators and contributors, enhance the quality and accuracy
of input data and methodologies used by administrators and ensure
adequate protection for consumers and investors using benchmarks.
On the basis of the preceding Committee's recommendation the House
of Commons issued a Reasoned Opinion on this proposal (in November
2013), challenging the supposed benefits of EU level action.
32.2 In February the previous Government told the
preceding Committee about a new compromise text tabled by the
Latvian Presidency, which contained significant improvements over
the previous version and which it wished to support in a General
Approach. The preceding Committee welcomed the improvements: the
focus on a limited number of "critical benchmarks" and
the reduced role for the European Securities and Markets Authority
in favour of national supervisory authorities. Although the Committee
found it premature to clear the document from scrutiny, it granted
a scrutiny waiver to enable the Government to support a General
Approach in the Council in line with the improvements in the compromise
text.
32.3 We thank the Minister for her update.
32.4 We welcome the continued focus of the Presidency
in trilogues on a proportionate approach to the regulation of
benchmarks. When trilogues are sufficiently advanced, we look
forward to hearing further from the Minister as to:
i) the extent to which the European Parliament's
"comply or explain" initiative is likely to incorporated
into a final text; and
ii) what such an initiative would involve,
particularly for UK benchmark producers, the financial services
industry and consumers.
32.5 In the meantime, the document remains under
scrutiny.
Full
details of the documents:
Proposal for a Regulation
on indices used as benchmarks in financial instruments and financial
contracts: (35328), 13985/13 + ADDs 1-2, COM(13) 641.
Background
32.6 An account of the provisions of the current
document, the draft Reasoned Opinion and the Commission's response
are set out in the following Reports of the preceding Committee:
Twentieth, Twenty-third, Thirty-ninth and Forty-seventh Reports
of 2013-14.
Minister's letter of 6 July 2015
32.7 In her letter of 6 July, the Economic Secretary
to the Treasury (Harriett Baldwin) says:
"The European Parliament voted to approve
the ECON Committee's report on the Regulation in a plenary vote
in early June. Their version of the text introduces a 'comply-or-explain'
regime for producers of benchmarks not designated 'critical'.
They also introduce a recognition regime for third country benchmarks
based on these benchmarks demonstrating compliance with the International
Organization of Securities Commissions Principles.
"Negotiations have now proceeded to trilogues,
where the European Parliament and the Council of the European
Union will try to reconcile their respective versions of the Regulation.
Two trilogues were held in June 2015. So far discussions have
focused on the issue of proportionality, and the Presidency of
the Council have attempted to develop a compromise incorporating
some aspects of the Parliament's 'comply-or-explain' regime for
smaller benchmark producers.
"The UK has supported efforts to avoid a
'one-size fits all' regime for benchmarks throughout the negotiation,
and so we therefore support this latest effort to ensure there
is appropriate proportionality incorporated into the final agreement.
"Luxembourg assumed the Presidency of the
Council on 1 July, and they will proceed towards negotiating an
agreement on the file; they have scheduled the first trilogue
with the Parliament for 15 July."
Previous Committee Reports
Thirty-seventh Report HC 219-xxxvi (2014-15), chapter
1 (18 March 2015); Twenty-eighth Report HC 219-xxvii, (2014-15),
chapter 7 (7 January 2015); Twenty-second Report HC 219-xxi, (2014-15),
chapter 8, (26 November 2014); Fifteenth Report HC 219-xv (2014-15),
chapter 8 (22 October 2014); Forty-seventh Report HC 83-xlii (2013-14),
chapter 12 (30 April 2014); Twenty-third Report HC 83-xxi (2013-14),
chapter 5 (20 November 2013); Twentieth Report HC 83-xix (2013-14),
chapter 4 (30 October 2013).
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