Report

Euribor makes ‘significant progress’ with reforms

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have published the results of their joint review of the Euribor-EBF.

The review found that Euribor-EBF has made significant progress in implementing the ESMA-EBA recommendations addressing weaknesses and shortcomings in its governance and technical framework.
 
This progress provides the basis for improved transparency of the benchmark-setting process, enhanced governance of the benchmark, and improved quality of the resulting index.
 
The authorities reviewed the progress made by Euribor-EBF in implementing the ESMA-EBA Recommendations of 11 January 2013 in the context of the ongoing Euribor reform. The review found that Euribor-EBF has undertaken reform measures across all affected areas, with four recommendations fully implemented and a further six recommendations partially implemented.
 
Steven Maijoor, ESMA chair, says: “Euribor is a key global financial benchmark. The reforms undertaken by Euribor-EBF are a key prerequisite for ensuring confidence among rate submitters and final users of the benchmark. Beyond the immediate changes recommended by the EBA and ESMA, international cooperation on reforming interbank benchmarks is progressing. Euribor should be ready to respond to these advances."
 
Andrea Enria, EBA chair, says: “Euribor-EBF is on the right path. Its progress in terms of governance and conduct reflects a strong commitment to ensuring the quality of its benchmarks. I remain confident that the Euribor-EBF will soon complete its work, building on the continued support and commitment of panel banks.”
 
Following the ESMA-EBA recommendations, Euribor-EBF has undertaken a number of steps aimed at addressing key areas. These include:
 
• The composition of the steering committee was changed to reduce the number of members affiliated with panel banks and increase the frequency of the steering committee meetings;
 
• Euribor-EBF discontinued its less frequently used tenors, reducing the overall number of tenors from 15 to eight;
 
• The Euribor-EBF Code of Conduct was reinforced at administrator level and a Code of Obligations for Panel Banks (COPB), effective as of 1 October 2013, was created, setting minimum requirements for the submission process and control mechanisms;
 
• Improved internal procedures and controls were applied by the calculation agent - Euribor-EBF specified the rules governing its operations with regard to the calculation of Euribor including a Code of Conduct for the agent’s operations;
 
• Post-fixing checks and back-testing analysis were implemented;
 
• Two distinct new conflict of interest policies were adopted covering potential conflicts at Euribor level and the Euribor-EBF level respectively; and
 
• Euribor-EBF committed to perform both internal and external audits on a regular basis and disclose results.

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