Extending the transitional period for third country benchmarks under the UK Benchmarks Regulation
Updated 8 November 2023
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Today, HM Treasury will lay a statutory instrument extending the transitional period for third country benchmarks to 31 December 2030 by amending Article 51(5) of the Benchmarks Regulation.
Benchmarks are of critical importance to the functioning of the UK economy. As retained EU law, the Benchmarks Regulation regulates administrators, supervised contributors and supervised users of benchmarks. These requirements relate to benchmark methodology, governance and transparency, and have applied in the UK since 1 January 2018.
The Benchmarks Regulation includes a third country regime which stipulates that only third country benchmark administrators approved for use via equivalence, recognition or endorsement may continue to be used within the UK after the end of a transitional period. Without this statutory instrument, the transitional period would expire at the end of 2025, at which time third country administrators must have taken one of the above access routes for their benchmarks to continue to be used in the UK.
The government has set out previously its concerns that, should the third country benchmarks regime come into force, it could reduce the number and variety of important benchmarks available in the UK. This is because some third country benchmark administrators may be unable or unwilling to come through the existing access routes for continued market access to the UK. For example, some third country benchmarks are provided on a non-commercial basis and therefore the administrators may lack the economic incentives to come through these access routes.
Through the Financial Services and Market Act 2023, the government has put in place significant new framework legislation to tailor financial services regulation to UK markets. It has also undertaken substantial work, in collaboration with the regulators and industry, to provide for an orderly wind-down of the LIBOR interest rate benchmark, including introducing legislation through the Financial Services Act 2021 and the Critical Benchmarks Act 2021. With this work complete, the government will consider where reforms are needed to the third country benchmarks regime, and make these changes as part of the implementation of the wider Smarter Regulatory Framework programme.
This extension to December 2030 provides time to do this, ensuring that UK companies can plan with confidence that they will not lose access to benchmarks that are critical to their operations, and the stability and prosperity of the UK economy.
HM Treasury intends for this statutory instrument to come into force on 1 January 2024.