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    ESMA Proposes Improvements to Third Country Benchmarks Regime

    August 19, 2022

    The European Securities and Markets Authority (ESMA) published its response to the European Commission consultation on the regime applicable to the use of benchmarks administered in a third country. In its response, ESMA comments on the functioning of the current regime and proposes improvements to the regulatory and supervisory framework as well as the European Union (EU) benchmark labels.

    The Benchmarks Regulation entered into application on January 01, 2018. The third country benchmarks are still under a grace period until December 31, 2023 (with a possible extension until December 31, 2025) where the use, in EU, of third country benchmarks not yet compliant with the Benchmarks Regulation is permitted. Currently the Benchmarks Regulation envisages two options for third country administrators willing to apply in EU; recognition (whereby ESMA is the competent authority responsible for the recognition and supervision of third country administrators) or endorsement (whereby national competent authorities are responsible for the endorsement and supervision of third country benchmarks). Pursuant to Article 54(6) of the Benchmarks Regulation, the European Commission should review the Benchmarks Regulation and submit a report to the European Parliament and to the Council by June 15, 2023. The consultation covers the topics of the continued use by supervised entities of third country benchmarks and the potential shortcomings of the current framework. 

    In its response to the consultation, ESMA opines that the

    • restrictions on the use of third country benchmarks should be removed following a risk-based approach while ensuring a level playing field between EU and third country administrators.
    • proposal to create a new category of ‘strategic’ benchmarks is supported by ESMA; this category would be the only category of benchmarks subject to mandatory restrictions of use, similar to the current rules.
    • introduction of an EU ESG benchmark label would be an extra supporting tool against greenwashing.

    ESMA emphasizes that while the Benchmarks Regulation covers a wide range of benchmarks used in the EU, so far very few jurisdictions have followed a similar regulatory approach regarding the provision and use of benchmarks. Therefore, the wide scope of the Benchmarks Regulation would lead to the undesirable outcome of limited availability of third country benchmarks to EU investors as opposed to their non-EU peers. The response has been submitted to the European Commission, which will prepare a report with recommendations on the effectiveness of the Benchmarks Regulation to the European Parliament and Council.


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    Keywords: Europe, EU, Banking, Securities, Insurance, Benchmarks Regime, ESG Benchmarks, ESG, Third Country Benchmarks, ESMA

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