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Flagship benchmarks benchmarked

On 22 July, IOSCO published a Review of the implementation of the principles on financial benchmarks by the administrators of Euribor, Libor and Tibor.

The 150 page review covers the degree of implementation of the principles as of 11 April 2014, only seven months after the final principles were released. The significance of these three benchmarks probably justifies this extremely tight timing. Two main concerns are raised by the review team.

Principle 7 on data sufficiency could not be rated at all. The administrators have been unable to provide the required data or analyses to demonstrate the accuracy and reliability of the benchmark, in particular as a measure of interbank unsecured funding transactions. A definition of “active” market should be developed, as well as methodologies to provide a basis for deciding whether the submissions are “anchored” in the market.

In addition, Principle 9 on transparency of benchmark determinations has not been implemented. In order to satisfy this principle, the administrators must publish an explanation for each benchmark determination. Further collaboration between the administrators and the submitters might be required, although the exchange of sensitive or confidential information concerns some submitters.

Summary of implementation

Principle Euribor Libor Tibor
1 Overall responsibility of the administrator Fully Fully Fully
2 Oversight of third parties Fully Fully Broadly
3 Conflicts of interest for administrators Fully Partly Partly
4 Control framework for administrators Broadly Broadly Broadly
5 Internal oversight Broadly Broadly Broadly
6 Benchmark design Partly Partly Not Implemented
7 Data sufficiency Not Rated Not Rated Not Rated
8 Hierarchy of data inputs Fully Fully Broadly
9 Transparency of benchmark determinations Not Implemented Not Implemented Not Implemented
10 Periodic review Fully Fully Broadly
11 Content of the methodology Broadly Broadly Broadly
12 Changes to the methodology Broadly Broadly Broadly
13 Transition Partly Partly Broadly
14 Submitter code of conduct Broadly Broadly Broadly
15 Internal controls over data collection Not Applicable Not Applicable Not Applicable
16 Complaints procedures Broadly Broadly Broadly
17 Audits Broadly Broadly Broadly
18 Audit trail Broadly Broadly Fully
19 Cooperation with regulatory authorities Fully Fully Broadly


Each of the administrators has received recommendations from the review team in order to finalise implementation of the IOSCO’s principles. A work plan should be developed and submitted to their regulatory authority by end 2014.

A flawless implementation of IOSCO principles by these flagship benchmarks is crucial, even though strictly speaking they have no legal force. The EU proposal for regulation on benchmarks is expected in early 2015 to follow IOSCO principles, but this time with full legal force over a wide range of benchmarks.

IOSCO intends to conduct a second review by mid-2015.

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