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Interbank interest rate benchmarks are systemic benchmarks which are important for the transmission of the euro area’s monetary policy. The Commission is therefore following developments on Euribor, in particular the recent departure of a number of panel banks. The integrity of benchmarks is critical to the pricing of many financial instruments, commercial and non-commercial contracts. Any failures may cause losses for investors, distort the real economy and undermine market confidence. Following recent events, the Commission swiftly advanced measures to ensure the integrity of benchmarks.
The amended proposals for the Market Abuse Regulation and Directive have been politically endorsed in the first stage of negotiations by the European Parliament and the Council. The Commission will propose further legislation on benchmarks in the second quarter of 2013 in order to clarify further the framework under which benchmarks should operate. In the meantime, the recent European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) recommendations address issues about Euribor governance and control arrangements. Therefore panel banks now have a better framework to make their contributions to benchmarks.
Interbank interest rate benchmarks are of systemic importance. The harm from any manipulation of rates has an impact on the market and the public at large. The continued existence of interbank interest rate benchmarks is also in the interests of the market and public at large. As a result, making submissions compulsory has been decided by the UK authorities in relation to Libor and was also discussed in the Commission services’ consultation paper. Any banks considering withdrawing from the contributing panels should therefore take into account that they may be required to rejoin the panels. The Commission is aiming to present its proposal on benchmarks in the second quarter of 2013 and I expect that proposal to include the power to impose mandatory submissions for systemic benchmarks such as Euribor. To ensure clarity, my services will ask the ESMA and the EBA to start preparatory work aimed at identifying banks in view of their involvement in interbank lending markets which should be subject to a mandatory participation in benchmark-setting.