EU pares back scope of BMR

The EU has published legislation in the Official Journal of the EU which significantly reduces the scope of the EU Benchmarks Regulation. From 1 January 2026 the revised regime will only apply to the following:

• Critical benchmarks

• Significant benchmarks

• EU climate transition benchmarks

• EU Paris-aligned benchmarks

• Certain commodity benchmarks based on consolidated input data

It means that the EU is now taking a more proportionate, and frankly more sensible, approach to benchmark regulation. The current EU framework captures all benchmarks, which means that the EU has created the most burdensome regulatory regime in the world. For third country benchmarks (i.e. those produced by an administrator based outside the EU), there were transitional provisions which allowed such administrators to offer their benchmarks to users in the EU without regulation, but those transitional provisions expired at the end of this year.

Key points to note:

• The test for critical benchmarks remains unchanged.

• There is a revised test for significant benchmarks (see Article 24), which are now defined as those which either (a) are referenced by financial contracts / instruments / funds of over €50 bn, or (b) are designated as such by ESMA (where there a few substitutes, or discontinuation will have material adverse effects for market integrity). There is also a voluntary compliance regime where administrators can opt-in and be treated as significant where the benchmark tips a €20bn threshold.

• Commodity benchmarks remain in-scope where they are both (a) based on data contributed in the majority by supervised entities, or (b) referenced by financial instruments / contracts with a value of over €200m over the course of a year.

• If approved benchmark administrators meet the revised criteria, they will not need to reapply.

• If they don't meet the revised criteria, benchmark administrators will be removed from the EU register by 30 September 2026.

• Where administrators of in-scope benchmarks refer to ESG factors in their legal or marketing documentation, they will need to explain consideration of these ESG factors

• There is a new restriction on EU firms using benchmarks which have been subject to a notice of non-compliance.

It will now be interesting to see whether the UK aligns itself with the EU regime, or takes a different approach. A revision to the UK BMR does not appear to be on the cards in the short-term, given that the UK transitional regime is in place until the end of 2030.