Business Law Magazine

Historical background

Interest rate benchmarks have a huge impact on decisions in the financial markets. They can therefore play a role in conflicts of interest, especially in situations where a person who controls an index used in establishing a benchmark is a direct or indirect beneficiary of the performance of that benchmark, as there is a risk that such a person may be tempted to manipulate the index. Benchmarks are vulnerable to manipulation because it is possible to take advantage of granted discretion and weak governance systems¬. Over the past several years, there were numerous instances of benchmark manipulation — a series of which became known as the Libor scandal.

Authors: Simon G. Grieser Jael Karck

The EU responded by adopting Regulation (EU) 2016/2011 (the Benchmark Regulation, or BMR). The BMR regulates indices used as benchmarks in financial instruments and financial contracts, as well as indices measuring the performance of investment funds. It also revises Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No. 596/2014.

The BMR came into force on June 30, 2016, and was applicable as of January 1, 2018. Since the latter date, an administrator has been responsible for managing new benchmarks. Article 51 of the BMR contains transitional provisions to cover the two-year period leading up to January 1, 2020, after which all requirements in the BMR become effective. In contrast to the Market Abuse Regulation and the Directive on Criminal Sanctions for Market Abuse, the BMR is viewed as a regulation aimed at prevention.

Read the full article, “An overview of the Benchmark Regulation,” at