Response to ESMA consultation on Benchmark Regulation guidelines

FESE welcomes the opportunity to provide a response to the ESMA consultation on methodology to be used in exceptional circumstances and amendments to the guidelines on non-significant benchmarks.

As a general remark we would call for a cautious approach, considering the need for flexibility to be able to deal with unforeseeable developments. The benchmark statement clearly describes the (changing) economic reality and the objective of the benchmark. We believe that the risk that such flexibility could be misused in an arbitrary way is therefore mitigated. Moreover, when making changes to methodology or to the hierarchy of input, data benchmark administrators need to follow governance rules, including fulfilling certain material and formal requirements before being able to make such changes. In instances of market turmoil, it is key that the need to make such changes quickly is considered, including a potential market consultation in case of material changes.

From our perspective, BMR already provides a well-functioning framework and the experience in March 2020 showed that the system has worked well. The difficulty is rather in understanding prevailing market conditions and finding adequate answers in terms of adjusted benchmark methodologies which reflect the conditions of benchmark users.