BMR Regulation. NewYork, Wednesday June 21 st 2017

Transcription

1 BMR Regulation NewYork, Wednesday June 21 st 2017

2 Agenda BMR Regulation Framework Evolution from Principles to Regulation Index or Benchmark? Watch out: Sanctions in 6 month time Benchmark Inventory Appendices TSAM NY June

3 Regulation vs Directive DIRECTIVE EBA ESMA EIOPA REGULATION ESA Other EU Regulator National Regulator NCA REGULATOR AND NATIONAL PARLIAMENT TRANSPOSE DIRECTIVE AFG/COSSIOM/European IPUG Member TSAM NY June

4 EEA Regulatory Bodies MIFID II MIFIR BMR EMIR ESMA BASEL III (CRD IV/CRR) EBA (regulatory) guidelines EBA Solvency II EIOPA (regulatory) guidelines EIOPA TSAM NY June

5 BMR Benchmark Regulation TSAM NY June

6 BMR IOSCO July 2013 Principles for Financial Benchmarks Benchmark Regulation BMR June 30 th 2016 Q March 31 st 2017 January 1 st 2018 January 1 st 2020 Entry Into Force ESMA Draft RTS 1 ESMA Final Draft RTS Date of Application (24 months post Entry Into Force Deadline for existing administrator to apply for registration/authorization (24 months after Date of Application) TSAM NY June

7 BMR Index vs Benchmark??? TSAM NY June

8 BMR An INDEX is any figure: that is published or made available to the public that is regularly determined: o entirely or partially by the application of a formula or any other method of calculation, or by an assessment; and o on the basis of the value of one or more underlying assets or prices, including estimated prices, actual or estimated interest rates, quotes and committed quotes, or other values or surveys. A BENCHMARK is the use of an Index in any of the following ways: issuance of a financial instrument which references an index or a combination of indices; determination of the amount payable under a financial instrument or a Loan or credit agreement by referencing an index or a combination of indices; being a party to a Loan or Credit agreement which references an index or a combination of indices; providing a borrowing rate as defined he interest rate expressed as a fixed or variable percentage applied on an annual basis to the amount of credit drawn down calculated as a spread or mark-up over an index or a combination of indices and that is solely used as a reference in a loan or credit agreement to which the creditor is a party; measuring the performance of an investment fund through an index or a combination of indices for the purpose of tracking the return of such index or combination of indices, of defining the asset allocation of a portfolio, or of computing the performance fees. TSAM NY June

9 BMR Any Index becomes a Benchmark when it is used in one of the defined ways set out in the BMR regulation TSAM NY June

10 BMR BMR regulates 3 areas Use of EU and third country benchmarks within EU AFG/COSSIOM/European IPUG members businesses in Scope Asset Management Investment Banking Administration Private Banking Wealth Management Asset Liability Management Contribution Treasury TSAM NY June

11 BMR There are three categories of benchmarks Critical Benchmarks based on both quantitative and qualitative criteria. (Total value of at least 500bn EUR) Significant Benchmarks based on both quantitative and qualitative criteria (Total value at least 50bn EUR) Non-significant Benchmarks covering a light regulatory regime (Total value less than 50bn EUR) There are four separate regimes 1. Commodity benchmarks (subject to the IOSCO principles for Oil Price Reporting Agencies) 2. Interest rate benchmarks (additional requirements relating to input data and contributors) 3. Regulated data benchmarks 4. All other benchmarks Use of third country benchmarks is permitted, based on IOSCO principles, via Equivalence regime Partial Equivalence regime Recognition of third country administrators Endorsement of third country benchmarks TSAM NY June

12 CRITICAL Benchmarks based on both quantitative and qualitative criteria. (Total value of at least 500bn EUR) BMR SIGNIFICANT Benchmarks based on both quantitative and qualitative criteria (Total value at least 50bn EUR) NON-SIGNIFICANT light regulatory regime (Total value less than 50bn EUR) YES In Scope? NO YES ESMA Publication Is the level made publicly available? NO Financial Instruments Is the level used in a relevant way for financial instruments? YES Exemption? YES NO Exempt from BMR NOT a BMR Benchmark NO Your level is a BMR Benchmark TSAM NY June

13 BMR From January 1 st 2018 you will not be able to use a Benchmark in a NEW transaction, contracts or products unless it is registered with ESMA! TSAM NY June

14 BMR Implementation of Benchmark Inventory TSAM NY June

15 BMR For BMR implementation all AFG/COSSIOM/European IPUG members need to complete and maintain an inventory of all Benchmark used All Benchmarks / reference rates you use regularly or would reasonably expect to use All Benchmarks/ reference rates used in transactions / products / orders taken in the EU Any reference rate which you think may not be a Benchmark Issue: Are all AFG/COSSIOM/European IPUG members using a Benchmark/Index Inventory System? Urgent Action Complete spreadsheet (in COSSIOM/IPUG Library) containing questionnaire designed to capture the Benchmark inventory in Index Licence Manager (ILM) Each Portfolio Manager (Gestionnaire d actif) desk to complete all fields in questionnaire, providing as much details as possible, including RICs and ISIN codes for the identified Benchmarks. Each Benchmark Sponsor needs to be contacted prior to Jan 1 st 2018! TSAM NY June

16 BMR Issue of Benchmark baskets in scope and those not in scope of BMR? -> To be closed Friday November 24 th during European IPUG Event in Paris Baskets BMR Non-BMR TSAM NY June

17 BMR Working Group Actions 1. Identify Benchmark instruments in-house Who to contact? - Product Control - Portfolio Management Risk 2. Confirm BMR Questionnaire - Do it alone - Join Industry Working Group 3. Send Questionnaire to each Benchmark Provider 4. Aggregate answers in BMR tool / ILM 5. Check and update registration status on ESMA website for each Benchmark Provider TSAM NY June

18 And in the meantime FTSE/Russell acquired Yield Book and Citi Fixed Income indices business ICE acquired BAML Fixed Income indices business Market has now 4 possible suppliers for FI benchmarks BBRG MarkIT FTSE/Russell ICE Who is next for JPM??? TSAM NY June

19 Add to your calendar IPUG Cost Optimisation / Index Licensing SIG London July 6 th SIPUG Day October 31 st Zurich EUROPEAN IPUG EVENT / COSSIOM November 24 th Paris TSAM NY June

20 Questions & Answers TSAM NY June

21 Appendix APPENDIX 1 TSAM NY June

22 BMR Sanctions for non compliance Sanctions and other administrative measures: 1- For infringements of Articles 4, 5, 6, 7, 8, 9, 10, points (a), (b), (c) and (e) of Article 11(1), Article 11(2) and (3), and Articles 12, 13,14, 15, 16, 21, 23, 24, 25, 26, 27, 28, 29 and 34, -> either EUR 1,000,000 or 10% of its total annual turnover according to the last available accounts approved by the management body, whichever is the higher. 2- For infringements of point (d) of Article 11(1) or of Article 11(4), -> either EUR 250,000 or 2% of its total annual turnover according to the last available accounts approved by the management body, whichever is the higher. 3- Those sanctions where the legal person is a parent undertaking or a subsidiary of a parent undertaking which has to prepare consolidated financial accounts in accordance with Directive 2013/34/EU of the European Parliament and of the Council, -> the relevant total annual turnover shall be the total annual turnover of the whole group. TSAM NY June