UK benchmark administrators will be able to operate within the European Union after the financial regulators of the two jurisdictions reached an agreement this week.
The European Securities and Market Authority (ESMA) and the Financial Conduct Authority (FCA) signed a Memorandum of Understanding (MoU) on 25 January which enables ESMA to start recognising benchmark administrators from the UK.
In an announcement yesterday, ESMA said the MoU is a “statement of intent to consult, cooperate and exchange information” between two financial watchdogs.
“The authorities recognise the importance of close communication concerning administrators in and their benchmarks,” it added.
These include the ongoing monitoring, suspension or withdrawal of benchmark administrators and the benchmarks they oversee.
Any material change in the methodology or input data used to calculate benchmarks will also need to be communicated by the benchmark administrator to the regulator.
Under the Benchmark Regulation (BMR), when non-EU benchmark administrators apply for recognition in the EU, ESMA must first establish an MoU with the relevant authority.
It comes after ESMA launched a consultation in July last year that aimed to introduce new requirements on the information for third-party country benchmark administrators needed to share with the regulator.
In 2020, the UK government announced equivalence between EU and UK benchmark administrators that are regulated under the benchmark regulation (BMR).
Following the decision, benchmark administrators from the European Economic Area (EEA) do not have to carry out the complex process of applying for recognition or endorsements that need to be approved in the UK.