European Benchmark Regulation

Improving the governance around the administration, contribution to and use of benchmarks in the EU.

Overview

Financial indices and reference rates (Benchmarks) are commonly used to determine amounts payable under various financial contracts and their value. Benchmarks have been the subject of ongoing scrutiny, guidance and reforms at national and international level. Within the European Union, the European Benchmark Regulation (BMR) was introduced in 2018 to govern the administration, contribution to and use of Benchmarks in the EU.

What does BMR mean for the Bank and our clients?

As a result, it may no longer be permissible or practicable for some market participants to enter into, or remain in, financial contracts or financial instruments which reference some Benchmarks, because such Benchmarks (or their administrator) may not comply with BMR. Some benchmarks may cease to be provided. Or some benchmarks, including their methodology, may materially change. These may have an impact on the financial contracts you have with us and we may be required to use an alternative benchmark.

If this is the case for any Benchmarks referenced in contracts you have with us, we will duly notify you and if applicable seek your consent to amend contracts accordingly. In addition, as per BMR, we are expected to produce and maintain robust fallback plans and where feasible and appropriate, the plan shall nominate one or several alternative benchmarks that could be referenced to substitute the benchmarks no longer provided, indicating why such benchmarks would be suitable alternatives. As far as possible, we aim to follow market practice.

For derivatives, ISDA has published the ISDA Benchmarks Supplement which may be adopted by parties to meet BMR requirements to have fallback language included into certain contracts. ISDA has also published the ISDA 2018 Benchmarks Supplement Protocol to assist with market participants’ adoption of the ISDA Benchmarks Supplement. The list of Standard Chartered entities which have adhered to the ISDA 2018 Benchmarks Supplement Protocol may be viewed here. Clients may want to engage independent consultants for advice, particularly when assessing the robustness of current contractual fallback language, and considering whether to adhere to the ISDA 2018 Benchmarks Supplement Protocol.

Related links:

LIBOR

Risks related to benchmarks