Our findings from a review of governance at a sample of benchmark administrators. We also share broader lessons from the review that firms may wish to consider.
1. Who this applies to
This multi-firm review will interest:
- benchmark administrators and the boards and management bodies responsible for benchmark administration activities
- governance, risk and compliance functions supporting benchmark administration activities
- wider group functions involved in governance, oversight or decision-making affecting benchmark administration activities
2. Why we did this work
This review is the final part of supervisory work undertaken in response to the risks identified in our 2024 portfolio letter. As outlined there, earlier supervisory work identified weaknesses in some governance arrangements at a number of benchmark administrators. This included management information that did not always support effective oversight of key risks, as well as risk frameworks that were not always sufficiently aligned to firms’ specific risks. Further concerns on governance emerged from our more recent review of quality controls and benchmark calculations.
We therefore wanted to:
- understand how these arrangements were operating in practice
- identify approaches that support effective oversight and decision-making
This work also gave us an opportunity to identify approaches that help boards operate effectively in a changing environment. Benchmark administrators are navigating developments in technology, data, cyber resilience, market structure and user expectations. Governance that is proportionate and decision-focused can help firms respond to changes with greater confidence and agility.
2.1. How we approached the review
We assessed governance across 5 areas:
- board composition and capability: whether the board collectively has the knowledge, experience, capacity and perspectives needed for the firm’s activities and risks
- board engagement, challenge and decisions: whether discussions support constructive challenge, clear decisions and appropriate follow-through
- governance structure, delegation and escalation: whether accountability, delegation and escalation operate clearly across the regulated entity and any wider group
- board packs and information flow: whether information is timely, relevant and useful for decision-making
- governance assurance and continuous improvement: how firms assess whether their arrangements continue to work in practice and remain suited to change
3. What we found
Firms generally had established governance frameworks and a clear commitment to oversight and accountability. We saw a range of governance models reflecting firms’ different business models, ownership structures and levels of complexity.
Our main observation is that governance creates most value when it helps a firm:
- make timely and well-informed decisions efficiently
- respond to change
- manage its most important risks
- maintain reliable services for users
The most effective arrangements were not defined by a particular structure. Rather, they were those that supported constructive challenge, maintained clear accountability and enabled follow-through on agreed actions.
Well-designed arrangements can also reduce duplication, clarify ownership and help boards to focus on the matters where their judgement adds most value. In turn, this helps firms navigate strategic change and future opportunities with greater confidence.
Our observations are not a checklist or template, and we do not expect firms to adopt a single governance model.
Each administrator should:
- consider our observations in light of its own activities, risks, users and operating environment
- assess whether its governance arrangements remain effective as risks and the operating environment evolve
Our aim is to help benchmark administrators consider where their arrangements could deliver better outcomes. This includes:
- clearer decisions
- more efficient use of board and management body time
- stronger resilience
- greater strategic adaptability
- sustained confidence among benchmark users
3.1. Board composition and capability
We saw good evidence of directors bringing relevant knowledge and experience. This reinforces the value of firms designing governance around their own circumstances rather than working towards a single sector model.
As risks and strategic priorities evolve, firms may benefit from considering whether the board continues to have the right collective capability. Relevant areas will differ by firm but may include:
- technology
- cyber resilience
- data management
- innovation
- methodology
- market structure
- user needs
The aim is not necessarily to add directors or committees. It is to make sure the board can access the expertise, information and support needed to make sound and timely decisions.
Executive and group-connected directors can bring valuable expertise, organisational knowledge and efficient links to wider resources. However, firms may wish to consider whether their overall board composition supports sufficient breadth of perspective and constructive challenge.
Independent input can be gained in different ways, depending on the firm’s scale and structure. This might include:
- non-executive directors
- directors without executive responsibility for the UK regulated entity
- specialist advisers
- other well-designed challenge mechanisms
Where the same individual holds several roles across the UK regulated entity, committees or the wider group, firms may benefit from considering:
- capacity
- competing priorities
- potential conflicts
- key-person dependency
Where individuals have multiple roles, this can support efficient information flows and access to group expertise. However, firms should remain alert to whether they could also concentrate decision-making, reduce independent challenge or create uncertainty about which responsibilities should take priority when competing demands arise.
Where responsibilities are concentrated among a small number of individuals, firms may wish to consider whether governance arrangements would remain effective if those individuals became unavailable or their responsibilities changed. Appropriate succession and contingency arrangements can help mitigate key-person dependency and maintain continuity of oversight and decision-making.
3.2. Board engagement, challenge and decisions
Effective challenge is important to sound governance. It helps boards:
- test assumptions
- consider alternative perspectives
- assess trade-offs
- evaluate the evidence on which decisions are based
We saw that directors often prepared carefully for meetings. In some cases, however, dense agendas or limited meeting time made it harder for boards to focus discussion on the issues requiring the most judgement. Firms may wish to consider whether meeting frequency, agenda design and time allocation are proportionate to the complexity, scale and risk profile of their business.
Clear records of decisions protect organisational memory and reduce the need to revisit settled questions. In some cases, governance records did not clearly capture board decisions, challenge, decision rationale and resulting actions. Firms are not expected to produce verbatim minutes. Concise records that capture the principal considerations, challenge, decision rationale, actions and ownership can support accountability while keeping the administrative burden proportionate.
Important decisions will sometimes be taken outside scheduled meetings. This can be an appropriate and agile response to fast-moving events. Firms may wish to make sure the resulting challenge, conclusions and actions are brought into the formal governance record where necessary. This ensures oversight and follow-through remain clear. Significant decisions should not become disconnected from formal governance processes. In particular, where subsequent oversight, accountability or implementation depends on them.
We saw examples of firms promoting organisational culture, capability development, ethical leadership and broader corporate responsibility. When embedded effectively, these initiatives can strengthen collaboration, support constructive challenge and contribute to more resilient and sustainable governance outcomes.
Overall, board engagement appeared most valuable where challenge could be linked to a clear decision, and subsequent change in direction, agreed or resulting actions.
3.3. Governance structure, delegation and escalation
Many benchmark administrators operate within wider domestic or international groups. Shared expertise, technology, controls and governance forums can bring significant benefits, including efficiency, consistency and access to specialist capability.
These arrangements appeared most effective where the UK regulated entity retained clear visibility of its own risks and obligations. Effectiveness also depended on information, challenge and escalation flowing between local and group governance forums.
There is no single preferred allocation of responsibilities. Firms should consider what is appropriate for their own structure. They should be able to explain:
- where key risks are owned
- how decisions are made
- how matters are escalated
- how the UK regulated entity’s obligations are reflected within wider group arrangements
We saw positive examples of UK regulated entity boards influencing wider group discussions and adapting group practices to fit the entity’s business model and risk profile. These examples showed how local oversight can shape group decision-making and help make sure considerations specific to the UK regulated entity receive appropriate attention. In some cases, however, information and escalation flows between the UK regulated entity and wider group governance forums were less developed. Clear communication channels and effective escalation pathways can help support stronger integration between local and group governance arrangements.
Sometimes individuals hold responsibilities across several entities or governance bodies. In these cases, firms should be aware of:
- potential conflicts
- commercial pressures
- competing priorities
Conflict arrangements appeared most meaningful where they reflected the firm’s actual structure and activities, rather than relying on generic policies or registers.
Firms may wish to consider how potential conflicts are identified, discussed and managed in practice. This includes whether an individual’s different responsibilities could affect how the issue is presented, escalated or considered. The appropriate arrangements will depend on the firm’s structure, but decision rights and accountability should remain clear.
Where information flows depend heavily on 1 or 2 individuals with multiple roles, firms may wish to consider how well the arrangements will work if those individuals are unavailable or their priorities change. Formalising key reporting and escalation channels can reduce dependency while keeping the benefits of group connections.
3.4. Board packs and information flow
Effective management information supports informed oversight and decision-making.
The objective is not to provide the maximum amount of information. Rather, it is to give the board a clear view of:
- performance
- emerging risks
- strategic delivery
- decisions or interventions required
We saw encouraging examples of firms improving board reporting through:
- dashboards
- clearer signposting
- revised formats
- earlier circulation
These changes helped directors focus on matters requiring judgement and challenge.
Some firms noted that the volume of reporting could make it difficult to identify the most important issues. Firms may wish to consider whether reports distinguish information provided for awareness from matters requiring discussion, decision or escalation.
Clear ownership, movement in risk exposure, progress against actions and the effectiveness of mitigation can make reporting more useful and reduce time spent navigating detail.
Management information appeared most effective where the connection between the underlying information and the question for the board was clear. Reporting also seemed more useful where it highlighted changes, exceptions and emerging trends, rather than relying mainly on static descriptions of current positions.
Management information is most valuable when it informs challenge, supports decisions and drives action. In some cases, the link between reporting, board challenge and resulting actions was unclear.
Firms can test reporting by asking whether it helped the board:
- identify a change
- challenge an assumption
- make a decision
- track an agreed outcome
Where that link is not clear, there may be opportunities to simplify reporting or refine thresholds and indicators.
Significant developments do not always align with scheduled board meetings. Proportionate arrangements for between-meeting escalation can support faster decisions and ensure directors receive information when it is most useful.
3.5. Governance assurance and continuous improvement
Governance assurance helps firms understand whether their arrangements continue to support effective decisions and oversight as the business changes. In some cases, firms may benefit from adopting a more structured approach to assessing governance effectiveness.
More structured effectiveness reviews often helped firms identify practical improvements. Reviews can be internally led, externally supported or incorporated into wider group processes. Whatever the approach, it should be able to identify issues relevant to the regulated entity. Periodic independent reviews may also provide a useful external perspective.
Firms may find it useful to examine outcomes as well as structures. This includes whether:
- challenge affected decisions
- actions were completed
- delegated bodies added value
- escalation worked when needed
Risk registers and action trackers were most useful when they supported active oversight rather than operating as static records.
Given the variety of sector structures, firms may wish to consider whether their conflicts-of-interest arrangements capture the full range of conflicts most relevant to their businesses. These may include:
- multiple roles
- group relationships
- commercial pressures
- competing priorities
- different stakeholder interests
Firms may also benefit from considering how conflicts arrangements operate. This includes whether:
- conflicts are identified early enough
- the appropriate individuals are involved in managing conflicts
- relevant decisions and mitigations are documented
Proportionate assurance can help firms identify cumbersome or duplicative processes as well as control gaps. It can therefore support both stronger oversight and more efficient governance.
Assurance appeared most useful where findings resulted in clear actions, ownership and follow-through, and where firms could show how lessons had been incorporated into governance arrangements.
Periodic review can also help firms assess whether established processes remain proportionate as the business and its operating environment change.
Assurance is most effective when it goes beyond confirming that governance structures exist. It should help firms understand how those arrangements support oversight, accountability and decision-making in practice.
4. How the FCA will use the findings
We will continue to use these observations to inform our supervisory engagement with benchmark administrators. We will consider them alongside wider developments affecting the benchmarks sector.
We recognise the regulatory framework for benchmarks is evolving and that the Government is currently reviewing the UK Benchmarks Regulation. We encourage benchmark administrators to engage with the reform process.
If you have any questions about this review, please email [email protected].