International financial services regulatory consultancy launches new benchmarks team

With the Financial Conduct Authority expected to publish its EU Benchmarks consultation paper on 22 June 2017, Bovill, the international financial services regulatory consultancy, has launched its new benchmarks proposition.

Bovill warns that hundreds of financial institutions will be affected by the new EU Benchmarks Regulation. Administrators of, submitters and users of benchmarks have less than six months to understand rule changes and ensure compliance before the legislation comes into force on 1 January 2018.

According to Bovill, the new rules create a host of requirements for benchmark administrators, contributors and users. They will be applicable to benchmarks referenced in: financial instruments traded on trading venues; mortgage and consumer credit contracts; or used to measure the performance of investment funds.

London City (PD)

Heading up Bovill’s new benchmarks team is Tobias Sproehnle, ex-Global Head of Benchmark Services at Thomson Reuters, and Gareth Parker, ex-Senior Director of Index Research, Design & Development at FTSE Russell.

Tobias Sproehnle, Consultant at Bovill, said:

The incoming EU Benchmarks Regulation is a critical and necessary piece of legislation. Benchmarks lie at the heart of financial markets as they help to price assets, measure the performance of investments and to manage risks in the financial system. Any weaknesses surrounding benchmarks may undermine market confidence, cause losses to consumers and investors and threaten the UK’s position as a leading international financial centre.

However, the complex nature of these new rules mustn’t be underestimated. Several hundred administrators of benchmarks will be affected by the changes and many more financial institutions will be captured by the regulation as submitters to and users of benchmarks. Leading up to January 1 2018, firms need to invest more heavily in time and resources in order to comply – or risk regulatory censure.

Gareth Parker, Consultant at Bovill, adds:

Some firms will have to create internal systems to govern, control, monitor and record the processes by which benchmarks are calculated and distributed, or by which data is submitted for use in benchmarks. For example, benchmark users should make sure they are aware of which benchmarks they use, and seek assurances and verification from administrators that they have plans in place to comply with the regulation. This is particularly important where the benchmarks are provided by smaller or third country administrators. 

However, time is ticking; it is essential for benchmark administrators, submitters and users to make a strategic decision about their role in the provision of benchmarks, or to ensure they implement the necessary changes rigorously. Much of the regulation requires further clarity, and interpretation is likely to be difficult, but failure to comply will lead to significant regulatory risk.

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