Commission Delegated Regulation (EU) 2021/1349 of 6 May 2021 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to regulatory technical standards specifying the criteria for the competent authorities’ compliance assessment regarding the mandatory administration of a critical benchmark (Text with EEA relevance)

• CELEX: Delegated Regulation (EU) 2021/1349
• Articles: 3

Article 1 Criteria for assessing the transition to a new administrator

Competent authorities shall, when assessing how a critical benchmark is to be transitioned to a new administrator, consider all of the following criteria:

(a)

whether the new administrator proposed in the assessment submitted by the current administrator pursuant to Article 21(1), point (b)(i), of Regulation (EU) 2016/1011:

(i)

is located in the same Member State as the current administrator, or in a different Member State in which case the competent authority, where necessary, shall cooperate with the competent authority of the Member State of the new administrator to assess whether the supervision of the critical benchmark will be ensured throughout the transition to the new administrator;

(ii)

is a supervised entity and, if so, for which activities it is supervised, and whether there are any actual or potential conflicts of interest with that entity’s existing activities;

(iii)

is a user of the benchmark and, if so, whether the conflicts of interest that may arise are adequately mitigated;

(iv)

is already authorised as a benchmark administrator under Article 34 of Regulation (EU) 2016/1011;

(v)

already provides benchmarks, and if so, whether those benchmarks are critical, significant, non-significant, commodity or interest rate benchmarks;

(b)

whether the current administrator of the critical benchmark has informed any contributors, users and other stakeholders or has conducted public consultations about the possible transition of the critical benchmark to the new administrator;

(c)

the way in which the new administrator intends to calculate the critical benchmark and whether that administrator intends to amend any of the following elements related to the critical benchmark and, if so, how the administrator will ensure the compliance of those elements with Regulation (EU) 2016/1011:

(i)

the methodology, including the quality of the input data, and its review;

(ii)

the contingency policy for the calculation of the benchmark;

(iii)

the procedures for handling errors in input data or in the redetermination of the benchmark;

(iv)

the code of conduct;

(d)

whether the new administrator will have access to the same input data as the current administrator, including historical input data held by the current administrator;

(e)

whether the IT infrastructures of the new administrator have been adequately tested for the provision of the critical benchmark;

(f)

where the critical benchmark is based on input data contributed by a panel of contributors, how the new administrator intends to fulfil the requirement set out in Article 11(1), point (d), of Regulation (EU) 2016/1011 and whether the current contributors will continue to be part of the panel after the benchmark’s transition to the new administrator;

(g)

the way in which the new administrator intends to publish the critical benchmark, including the standard daily publication arrangements, the frequency of publication, the address of the website and whether critical benchmark will be accessible upon payment of a fee or free of charge;

(h)

whether there is detailed plan for the transition date, and if so, whether that plan deals with all possible issues, including contractual issues, stemming from the transition of the critical benchmark to a new administrator;

(i)

legal risks involved in the transition, including the risk of contract frustration;

(j)

the accounting and tax implications of the critical benchmark being provided by a new administrator;

(k)

the impact of the transition on financial market infrastructures, including clearing houses.

Article 2 Criteria for assessing the cessation of the provision of a critical benchmark

1.   Competent authorities shall, when assessing how a critical benchmark is to be ceased to be provided, consider all of the following criteria:

(a)

the effectiveness of the procedure established in accordance with Article 28(1) of Regulation (EU) 2016/1011, and in particular:

(i)

whether that procedure precisely defines the actions to be taken by the administrator to cease in an orderly fashion the provision of the critical benchmark;

(ii)

whether, considering the circumstances of the specific case, those actions will be adequate to ensure the cessation in an orderly fashion of the provision of the critical benchmark, having also regard to the criterion referred to in point (b) of this paragraph;

(iii)

when that procedure was produced and when it was last updated;

(b)

the written plans referred to in Article 28(2) of Regulation (EU) 2016/1011 and in particular:

(i)

whether those written plans nominate suitable alternative benchmarks that can be referenced to substitute the critical benchmark and, if so, whether those written plans nominate the same or different alternative benchmarks;

(ii)

where those written plans nominate the same alternative benchmark, whether that benchmark has been adopted in different asset classes;

(iii)

whether the trigger events for the cessation of the provision of critical benchmark included in the written plans are the same among the plans produced by the supervised entities using that critical benchmark, where it is feasible to assess this;

(c)

whether the administrators of the alternative benchmarks referred to in point (b)(i) of this paragraph are authorised;

(d)

where feasible, whether the cessation of the provision of the critical benchmark would have an adverse impact on the market integrity, financial stability, consumers, the real economy, or the financing of households and businesses  ( 4 ) ;

(e)

whether the cessation of the provision of the critical benchmark would result in a force majeure event;

(f)

the dynamics of the market or economic reality that the critical benchmark intends to measure and whether there exists input data of sufficient quality and quantity to represent that underlying market or economic reality with precision;

(g)

whether the administrator has informed any contributors to the critical benchmark, users of that benchmark and other stakeholders or has conducted public consultations about the possible cessation of the provision of the critical benchmark;

(h)

any legal risks involved in the cessation of the provision of the critical benchmark;

(i)

the accounting and tax implications of the cessation of the provision of the critical benchmark;

(j)

the impact of the cessation of the provision of the critical benchmark on market infrastructures, including clearing houses.

For the purposes of point (c), where the administrators of the alternative benchmarks referred to in point (b)(i) of this paragraph are not authorised, the competent authority shall assess the conditions of their authorisation under Article 34 of Regulation (EU) 2016/1011 and shall assess whether a period of mandatory administration of the critical benchmark is necessary to allow for authorisation of the administrators of those alternative benchmarks.

2.   In addition to the criteria referred to in paragraph 1, point (a), a competent authority may assess whether the procedure established by the administrator in accordance with Article 28(1) of Regulation (EU) 2016/1011 is appropriate having regard to the following elements concerning the financial instruments, financial contracts or investment funds which reference the critical benchmark:

(a)

their volume and value;

(b)

the term, duration, maturity or expiry date of the financial instruments, financial contracts and any other document entered into for measuring the performance of an investment fund through an index or a combination of indices for the purpose of tracking the return of such index or combination of indices, of defining the asset allocation of a portfolio, or of computing the performance fees;

(c)

whether the critical benchmark will continue to be provided for use during a transitional or run-off period;

(d)

whether the procedure referred to in Article 28(1) of Regulation (EU) 2016/1011 provides for such changes to the critical benchmark as may be necessary to ensure that the critical benchmark remains reliable and representative of the underlying market or economic reality which it intends to measure throughout the period referred to in subparagraph 2(c) of this Article;

(e)

the likelihood that any such financial instrument, financial contract or other document entered into for measuring the performance of an investment fund through an index or a combination of indices for the purpose of tracking the return of such index or combination of indices, of defining the asset allocation of a portfolio, or of computing the performance fees would be frustrated or that its terms would be breached in the event of the cessation of the provision of the critical benchmark.

Article 3 Entry into force and application

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union .

It shall apply from 1 January 2022.