Benchmarks Regulation: our new powers, policy and decision-making

We are setting out the considerations we will take into account when exercising our powers, as provided under the Financial Services (FS) Act, to ‘designate’ a critical benchmark and to impose changes to that benchmark. This will inform how we use our new powers to help manage an orderly wind-down of critical benchmarks, such as LIBOR.

Benchmarks are used in a wide range of markets to help set prices, measure performance, or work out amounts payable under financial contracts. They are integral to the functioning of the financial markets.

Under the amendments to the Benchmarks Regulation in the FS Act, we have new powers. The FS Act requires us to publish Statements of Policy before exercising certain powers and we must have regard to them when exercising these powers. We said in June that we would engage with the market when developing these Statements of Policy.

We consulted on our proposals in November 2020 and are now setting out our final policy on:

We took account of responses to our engagement.

In May 2021, we consulted on our proposed policy for using 2 of our other new powers. These powers relate to the use of critical benchmarks that are being wound down:  

Permitting legacy use of an Article 23A benchmark (under Article 23C). 

Restricting new use of a ceasing critical benchmark (under Article 21A).  

The consultation closed on 17 June.  

In June 2021, we published a further consultation on our proposed decision under Article 23D, to require a change in methodology for 6 sterling and yen LIBOR settings. The consultation closes on 27 August 2021. 

Who these documents apply to

We expect this work to be of interest to:

  • administrators of critical benchmarks 
  • contributors to critical benchmarks 
  • all users of critical benchmarks, both regulated and unregulated

Next steps

We plan to undertake a short consultation in Q3 of 2021, likely mid-September, on proposed decisions under Article 21A and Article 23C. We strongly encourage firms to respond to this consultation.

We intend to confirm our final decisions as soon as practicable in Q4.

We may reissue a revised Statement of Policy in future if our policy changes. 

Overview

We explain in our overview document where a Statement of Policy would be expected and the background and context to this work. 

Page updates

22/07/2021: Information changed We plan to undertake a short consultation in Q3 of 2021