LONDON, Feb 26 (Reuters) - The European Union has agreed to give the financial sector an extra two years to comply with new rules aimed at avoiding a repeat of attempts to rig the Libor interest rate benchmark.
The executive European Commission said late on Monday that representatives of EU states and the European Parliament backed giving compilers of “critical” interest rate and other widely used benchmarks until Dec. 31, 2021 to comply with the bloc’s new rules.
In a surprise move, they also backed giving compilers of benchmarks based outside the bloc two more years to obtain EU authorisation for their indexes to be used by EU customers. Formal rubber-stamping of the deal is now needed for the change to come into effect.
“Policymakers have bought time” said Markus Ferber, a senior member of the European Parliament, adding that the extension had avoided “chaos” in key areas like mortgage markets.
“Now it is for benchmark administrators to make good use of that time to get all benchmarks into conformity with the regulation as soon as possible.”
Banks in Europe and the United States were fined billions of dollars for trying to rig Libor and its European counterpart Euribor, rates that are widely used as a reference for pricing home loans, credit cards and other products.
The scandal prompted the EU to pass a set of rules for benchmark providers, and compilers originally had until the end of 2019 to comply with tougher standards aimed at making it harder to manipulate benchmarks.
The compilers and users of benchmarks inside and outside the EU said they would struggle to be ready in time, raising the prospect of disruption in markets as users sought to avoid unauthorised benchmarks.
“The inclusion of non-EU benchmarks is important given the practical difficulties end-users would have faced due to issues associated with the qualification process for third-country benchmarks,” said Rick Sandilands, a senior counsel at ISDA, a global derivatives industry body.
Reporting by Huw Jones and Marc Jones; Editing by Catherine Evans