Documents considered by the Committee on 21 July 2015 - European Scrutiny Contents

32 Financial services: benchmarks

Committee's assessment Legally and politically important
Committee's decisionNot cleared from scrutiny; further information requested
Document detailsProposed Regulation on benchmarks used in the financial services sector
Legal baseArticle 114 TFEU; ordinary legislative procedure; QMV
DepartmentHM 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.


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).

previous page contents next page

© Parliamentary copyright 2015
Prepared 30 July 2015