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BMR Benchmark Regulation

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What is benchmark regulation?

Following the Libor (London Inter-bank Offered Rate) scandal of 2012, the European Parliament and other bodies took steps to ensure strict and effective benchmark regulation. Benchmark regulation is a regime for benchmark administrators that aims to guarantee the accuracy and integrity of benchmarks.

Introduction to BMR - Benchmark Regulation
This took form in the Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 which became applicable starting from the 1st of January 2018. The regulation includes outlines for the overall responsibility of benchmark administrators, the quality of the benchmark, and accountability amongst others.

What is the difference between a benchmark and a reference rate?

A benchmark is a standard against which the performance of a security, mutual fund or investment manager can be measured. A reference rate is an interest rate benchmark used to set other interest rates. Reference rates are useful in homeowner mortgages and sophisticated interest rate swap transactions made by institutions.

How are benchmarks regulated?

The EU BMR is a regulation on benchmarks in the European Union that aims to ensure the reliability of benchmarks and minimize conflicts of interest in benchmark-setting processes. It came into effect on January 1st, 2018, and applies to any benchmark used within the EU. The regulation introduces a regime for benchmark administrators that ensures the accuracy and integrity of benchmarks.
The ESMA Benchmarks Regulation requires contributors of input data to follow a code of conduct that mandates the use of robust methodologies and sufficient and reliable data. If an administrator fails to comply with the regulation, the competent authority may withdraw or suspend its authorization/registration. The supervision of benchmark administrators by national competent authorities is coordinated by ESMA.
What's a benchmark ? (BMR)

The EBA is responsible for conducting supervisory benchmarking exercises, which provide banks with valuable information on their risk assessments compared to other banks' assessments of comparable portfolios. The EBA issues an ITS package each year for the benchmarking exercises.

How can Pideeco help you with BMR Benchmark Regulation?

Financial institutions may find it challenging to determine whether they are in compliance with the Benchmark Regulation (BMR) due to the numerous requirements and responsibilities associated with creating, maintaining, and supervising benchmarks, as well as the potential effects of non-compliance on market stability and investor protection. Pideeco can help you to:

- Draft or improve your current policies and procedures on BMR.

- Navigate the regulatory landscape of BMR.

- Implement or improve governance and controls over the benchmark process.

- Set-up and execute an action plan to spot and mitigate any gaps such as conflict of interest, transparency, etc.

- All kinds of reporting related to BMR, including the EBA’s ITS package.

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