Financial Benchmarks Regulatory Reform: Consultation

The Council of Financial Regulators (CFR) is today releasing a Consultation Paper: Financial Benchmarks Regulatory Reform.

Financial benchmarks are of critical importance to a wide range of users in financial markets and throughout the broader economy. Benchmarks affect the pricing of financial products such as credit facilities offered by financial institutions, corporate debt securities, exchange-traded funds (ETFs), foreign exchange (FX) and interest rate derivatives, commodity derivatives, equity and bond index futures and other investments and risk management products. They also drive or influence asset allocation decisions within investment portfolios.

To ensure the robustness and reliability of financial benchmarks in the Australian economy and to promote continued confidence in Australia's financial markets, the CFR is consulting on regulatory reform proposals relating to the administration of significant benchmarks, submission to significant benchmarks, and offences applying to benchmark misconduct.

The proposals are guided by the IOSCO Principles for Financial Benchmarks and by the recommendations of the Financial Stability Board with regards to FX benchmarks and interest rate benchmarks. They are also informed by reforms proposed or implemented in foreign jurisdictions.

The CFR invites views on the proposed reform options.

The closing date for submissions is 29 April 2016. Submissions can be sent to: financial.benchmarks@asic.gov.au

For further details, please see the CFR consultation paper: Financial Benchmarks Regulatory Reform.

Background

Financial benchmarks are indices or indicators used as reference prices for financial instruments or contracts, or to measure the performance of investment funds.

The CFR recently undertook a consultation process on the evolution of the bank bill swap rate (BBSW) benchmark calculation methodology with a view to ensure that BBSW remains a trusted, reliable and robust financial benchmark going forward.

The Australian Securities and Investments Commission (ASIC) continues its investigations into past financial benchmark-related conduct issues. On 4 March 2016, ASIC commenced civil penalty proceedings against the Australia and New Zealand Banking Group Limited (ANZ) in relation to the ANZ's involvement in setting the BBSW.

In conjunction with the Consultation Paper released today, these highlight the CFR's commitment to the fair and effective operation of benchmarks within Australia's financial markets.