Key Facts

• The spaces are marked to enforce social distancing.
• Members should email electronic copies of their speaking notes to hansardnotes@parliament.uk.
• Amendment 28 aims to address critical benchmarks under the Benchmarks regulation as amended by the Financial Services Bill.
• The amendment focuses on preventing benchmark manipulation, ensuring robust sanctions including custodial sentences for offenders.
• LIBOR (London Interbank Offered Rate) manipulation is highlighted as a past issue affecting trillions of pounds' worth of trades.
• A benchmark is a standard against which the performance of a fund can be measured or by reference to which payments can be calculated.
• LIBOR reflects interest rates for inter-bank lending and borrowing and is published over seven time periods ranging from overnight up to one year.
• The FCA has regulated LIBOR since 2013 under the Financial Services and Markets Act 2000 and subsequently under the benchmarks regulation.
• Clause 8 adds new criteria for designating a benchmark as critical.
• A quantitative threshold of €400 billion-worth of products has been removed from the existing tests.
• The industry supports additional safe harbour provisions complementing the Bill's provisions.
• Contracts face barriers to moving off a benchmark due to bilateral or multilateral agreements.
• Parties may not be able to achieve consensus for changes in certain situations.
• The FCA will use its power to recognise critical benchmarks if their cessation would adversely affect market integrity.
• Article 21 gives the FCA power to compel the provision of a critical benchmark if the administrator intends to cease providing it.
• Clause 9 extends the maximum compulsion period from five to ten years.
• The FCA must assess and inform the administrator in writing whether the benchmark is representative or at risk of becoming unrepresentative.
• Clause 10 inserts article 21A into the benchmarks regulation.
• The FCA can issue a prohibition notice if an administrator intends to cease providing a critical benchmark.
• The notice must contain reasons for the prohibition, its effective date, and any additional information deemed necessary by the FCA.
• Clause 11 introduces new articles 22A and 22B to the benchmarks regulation.
• New article 22A requires benchmark administrators to assess representativeness every two years or when a contributor proposes to withdraw.
• Contributors must provide written notification of intent to cease contributing at least 15 weeks ahead, up from four weeks previously.
• The clause inserts a new article into the benchmarks regulation.
• It allows the FCA to designate a benchmark if its representativeness cannot reasonably be restored.
• The FCA must inform the administrator and allow 14 days for representations before proceeding.
• A notice must be published including reasons, date of effect, and other relevant information.
• The transition from LIBOR to new benchmarks poses a systemic risk due to trillions of dollars involved.
• Clause 13 and following clauses allow the FCA to mandate continued legacy use of designated benchmarks despite discontinuation.
• Without safe harbour provisions, there is a risk of forum shopping or regulatory arbitrage.
• The Government recognises challenges identified by trade associations regarding safe harbours.
• International dialogue with US regulatory bodies is ongoing through a regulatory working group.
• The FCA must produce statements of policy and notices when exercising powers under the Bill.
• Benchmark administrators have the option to refer matters to the upper tribunal if challenged.