UK FCA findings on governance in the benchmarks sector

The UK Financial Conduct Authority (FCA) has published its findings from a review of governance at a sample of benchmark administrators. The review is the final part of supervisory work undertaken in response to risks identified in the FCA's 2024 portfolio letter, which highlighted weaknesses in some governance arrangements. In this review, the FCA assessed governance across five areas: (i) board composition and capability; (ii) board engagement, challenge and decisions; (iii) governance structure, delegation and escalation; (iv) board packs and information flow; and (v) governance assurance and continuous improvement. Firms generally had established governance frameworks and a clear commitment to oversight and accountability.

The FCA's key observations include:

• Board capability: As risks evolve, firms may benefit from considering whether the board continues to have the right collective capability, for example in technology, cyber resilience, data management and methodology. Where individuals hold several roles, firms may benefit from considering capacity, competing priorities, potential conflicts and key-person dependency.
• Decisions: In some cases, governance records did not clearly capture board decisions, challenge, decision rationale and resulting actions. Firms may want to ensure that decisions taken outside scheduled meetings are brought into the formal governance record where necessary.
• Group structures: Arrangements were most effective where the UK regulated entity retained clear visibility of its own risks and obligations. Where individuals hold responsibilities across several entities or governance bodies, firms should consider how potential conflicts are identified, discussed and managed in practice.
• Management information: Some firms noted that the volume of reporting could make it difficult to identify the most important issues. Firms may wish to consider whether reports distinguish information provided for awareness from matters requiring discussion, decision or escalation.
• Assurance and conflicts: Some firms may benefit from adopting a more structured approach to assessing governance effectiveness. Firms may wish to consider whether their conflicts-of-interest arrangements capture the full range of conflicts most relevant to their businesses, and how these arrangements operate.

The government is currently reviewing the UK Benchmarks Regulation and its consultation on the proposed new Specified Authorised Benchmark Regime closed earlier this year. The FCA welcomed the consultation and is working with the government to reform the regime, although has not confirmed its next steps, and no upcoming formal engagement is noted on the Regulatory Initiatives Grid. It encourages benchmark administrators to engage with the reform process.

Return to main website.