Council of the EU adopts financial benchmarks regulation

The Council of the EU has announced that it has adopted at first reading the financial benchmarks regulation with the aim of reducing red tape for EU companies, particularly SMEs. The regulation amends the Benchmark Regulation (Regulation 2016/1011) (BMR) to reduce the regulatory burden on administrators of benchmarks defined as non-significant by removing them from the scope of the legislation. Critical or significant benchmarks will remain within the scope of the revised BMR. EU administrators that are out of scope will be able to opt-in, under certain conditions.

Additionally, the regulation will establish a revised framework for non-EU benchmark administrators to access the EU markets by, among other things, allowing for recognition without requiring equivalence. The European Securities and Markets Authority (ESMA) is granted supervisory powers over non-EU benchmark administrators, aligning ESMA's oversight across both the recognition and endorsement regimes.

The amendments also provide that administrators of EU Climate Transition Benchmarks and EU Paris-Aligned Benchmarks must be registered, authorised, recognised or endorsed to ensure regulatory oversight and prevent misleading ESG claims. EU Climate Transition Benchmarks must include the acronym "CTB" and EU Paris-aligned Benchmarks must include "PAB" in their names. The European Commission (EC) must assess by 30 June 2029, the appropriateness of current ESG disclosure requirements and their alignment with other sustainability-related regulations. The EC is mandated to exempt, after consultation, spot foreign exchange benchmarks provided by non-EU benchmark administrators where the benchmark references spot exchange rates of a third-country currency, subject to certain conditions being met. This aims to ensure that benchmark users in the EU have access to hedging instruments where currency controls apply. The regulation now needs to be adopted by the European Parliament at second reading (currently scheduled for 8 April) before it can be published in the Official Journal of the EU and enter into force. The proposed application date of the amending regulation is 1 January 2026. There are various transitional provisions to smooth the transition of these revisions, including that all authorised, registered or recognised, or as endorsing administrators as at 31 December will retain that status until 30 September 2026.

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