IOSCO published a report, titled “Review of the Implementation of IOSCO’s Principles for Financial Benchmarks by Administrators of LIBOR, EURIBOR and TIBOR” (the “Report”), which assesses the three major interest rates reference benchmarks against the internationally agreed upon IOSCO Principles for Financial Benchmarks.
The Report was prepared in response to a request, in the Financial Stability Board’s report on reforming major interest rate benchmarks, to review the three major benchmarks.
According to the Report, completed and ongoing reforms have raised the overall oversight, governance, transparency and accountability of the three administrators and their respective benchmarks. Additionally, these reforms have occurred in the context of regulatory, operational and organizational changes.
The Report noted further that work is still needed on the benchmarks’ methodology and design. In particular, the Report suggests that LIBOR and TIBOR administrators need to devote more attention to the management of conflicts of interest.
One specific challenge noted by the Report is posed by the assessment of Principle 7, which provides that “the data used to construct a benchmark determination should be sufficient to accurately and reliably represent the interest measured by the benchmark.” According to IOSCO, none of the administrators have provided all of the required data or analyses needed to demonstrate compliance with Principle 7. IOSCO strongly encouraged the three administrators to continue addressing Principle 7 as a matter of urgency, and recommended conducting another implementation review of the three administrators in mid-2015.