The FCA has published a consultation paper on its proposed policy approach to two new powers introduced through amendments to the Benchmarks Regulation (BMR) under the Financial Services Act 2021 (FS Act).
The powers relate to the use of critical benchmarks that are being wound down, and are:
- a ‘legacy use power’ which will enable the FCA to designate a critical benchmark as an ‘Article 23A benchmark’ where it has become permanently unrepresentative of the market it is intended to measure; and
- a ‘new use restriction’ power which will give the FCA the ability to prohibit some or all new use of a critical benchmark when it has been notified by its administrator that it will cease to be provided.
The powers are intended to provide the FCA with the requisite regulatory powers to reduce risk in the wind down period before LIBOR ceases permanently.
The consultation applies to both regulated and unregulated users of critical benchmarks, including:
- Building societies and banks
- Corporates of all sizes
- Life insurance and pension providers
- Mortgage lenders
- Consumers who have mortgages or other consumer loans that use critical benchmarks
- Investment managers; and
- Administrators of critical benchmarks.
The consultation closes to comments on 17 June 2021. A Statement of Policy and feedback statement will follow in Q3.