ESMA is the supervisor of administrators of EU critical benchmarks and of third-country administrators recognised in the EU. ESMA is also responsible for promoting the consistent implementation of the Benchmarks Regulation across the EU using a variety of policy tools.
The Benchmarks Regulation aims at protecting consumers and investors exposed to benchmarks thanks to greater transparency and rigorous oversight over the provision of benchmarks in the EU.
The scope of the Benchmarks Regulation is broad. It includes three categories of benchmarks: critical, significant and non-significant benchmarks, with critical benchmarks subject to stricter rules. The Benchmarks Regulation includes also specific rules for commodity benchmarks and interest rates. In November 2019, two new categories of benchmarks were included: EU Climate Transition and EU Paris-aligned benchmarks.
Benchmarks provided from outside the EU can be offered in the EU market under one of the following BMR regimes for third-country benchmarks: equivalence, recognition or endorsement.
The equivalence regime applies at jurisdiction level, and it is driven by an assessment by the Commission. When the Commission adopts an equivalence decision, stating that the regulatory framework of a third-country is equivalent to the EU BMR, ESMA establishes cooperation arrangements with the competent authority of that third country. The following are the equivalent decisions adopted by the Commission under BMR and the corresponding cooperation arrangements between ESMA and the third country authorities.
ESMA as supervisor of benchmark administrators
From 1 January 2022, ESMA became the supervisor of the existing administrators of EU critical benchmarks and recognised third-country benchmark administrators. Since 1 January 2022, ESMA is also responsible for authorising any new administrators of EU critical benchmarks and recognising third-country benchmark administrators. ESMA’s supervision for benchmarks administrators is risk-based, outcome-based and data-driven.
Critical benchmarks fall in two categories. Those that are critical across the EU (EU critical benchmarks) or they are critical in one Member State (national critical benchmarks). The list of all critical benchmarks is available here. The national competent authorities are responsible for the supervision of the administrators providing national critical benchmarks in their respective country. ESMA is responsible for the supervision of the EU critical benchmarks. Currently, the only EU critical benchmark is EURIBOR, administered by the European Money Markets Institute (EMMI). In July 2019, EMMI was authorised as administrator of EURIBOR under the Benchmarks Regulation by the Belgian Financial Services and Markets Authority (FSMA). On 1 January 2022, the supervisory responsibilities over EMMI were transferred from the FSMA to ESMA.
ESMA is also responsible for the supervision in the EU of third-country benchmark administrators that are recognised under BMR. You can find in ESMA’s register the list of the administrators and third-country benchmarks that are supervised by ESMA.
If an administrator, located in a third country, wishes to be recognised in the EU for its benchmarks to be used in the EU, then it has to apply for recognition with ESMA. Article 32 of the Benchmarks Regulation requires the applicant administrator to provide all information necessary to satisfy ESMA that it has established, at the time of recognition, all the necessary arrangements to meet the requirements set out in the Benchmarks Regulation and further specified in Commission Delegated Regulation (EU) 2018/1645. The form and content of an application for recognition are detailed in Commission Delegated Regulation (EU) 2018/1645.
Before submitting an application for recognition, applicants are strongly encouraged to engage with ESMA as they prepare the necessary documentation for the application. Administrators interested in applying for recognition can reach out to ESMA by email (Supervision-BMR@esma.europa.eu). Such pre-application engagement will in no way prejudice the subsequent submission of the application.
When a third-country benchmark administrator submits an application for recognition to ESMA, ESMA will start its assessment of the administrator’s compliance with the relevant requirements of the Benchmarks Regulation. If an application contains all the necessary information, ESMA will finalise its assessment within 90 working days of receipt of the application.
When ESMA identifies that information is missing in the submitted application, ESMA will request the applicant to provide the missing information within a specified deadline. Applicants should note that the timing of ESMA’s assessment could be impacted when applicants do not provide all necessary information and ESMA needs to request the missing information following the submission of the application. Applicants should also take note that, if they do not provide the requested missing information, ESMA will base its assessment of the application on the information at its disposal, which may be detrimental to ESMA’s ability to conclude positively on the applicant’s compliance with the conditions for recognition.
ESMA charges a fee to applicants for each application for recognition received. ESMA also charges annual supervisory fees to the administrators it supervises. The fee amount is defined in Commission delegated regulation on supervisory fees applicable to benchmark administrators.
Under the Benchmarks Regulation, a supervised entity located in the EU may use a benchmark: (i) if the benchmark is provided by an administrator located in the EU included in the ESMA register or (ii) if the benchmark is provided by an administrator located outside the EU and the benchmark is included in the ESMA register. ESMA publishes a register of administrators and third country benchmarks, in accordance with Article 36 of the Benchmarks Regulation. ESMA started publishing this list of Administrators and third country benchmarks on 3 January 2018.
The Benchmarks Regulation empowered ESMA to develop Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS). Furthermore, the European Commission requested ESMA to provide technical advice for the adoption of Commission delegated acts. A full overview of the Implementing and Delegated Acts on the Benchmarks Regulation is available here.
ESMA has also used its different policy tools and has already issued guidelines, Q&As, supervisory briefings, and briefings on various topics related to the Benchmarks Regulation, to promote a consistent and convergent application of the requirements across the EU.
ESMA publishes on an annual basis a report with aggregated information on all administrative sanctions and measures and all criminal sanctions imposed by the national competent authorities under the Benchmarks Regulation.
As the supervisor of EURIBOR administrator, EMMI, ESMA is the Chair of the EURIBOR College of Supervisors. The College is composed, alongside ESMA, of the national competent authorities responsible for the supervision of the banks contributing to EURIBOR as well as the national competent authorities of Member States in which EURIBOR plays a critical role.
ESMA is also the secretariat of the working group on euro risk-free rates. The working group on euro risk-free rates is a private sector working group established in 2018 by ESMA, European Central Bank (ECB), European Commission and the Belgian Financial Services and Markets Authority (FSMA). Since May 2021, ESMA has acted as s the secretariat for the group.
▸ More information in the dedicated section.