LONDON (Reuters) - European Union states agreed a common position on Friday to regulate market benchmarks, opening the door to negotiations on a final agreement with lawmakers on new rules to avoid more damaging market rigging scandals.
The draft law was proposed by the bloc’s European Commission after banks were fined for trying to rig interest rate benchmarks. Since then lenders have also been fined for trying to manipulate currency benchmarks, prompting lawmakers to toughen up the draft law.
“Doubts about the integrity of indices used as benchmarks can undermine market confidence, cause losses to consumers and investors and distort the real economy,” EU presidency Latvia, which brokered the deal among member states, said in a statement.
EU states have amended the original draft to widen the net so that more benchmarks are deemed to be “critical” and thus subject to the toughest level of supervision and requirements.
“The scope of the regulation is broad, although benchmarks deemed to be critical will be subject to stricter rules, including the power for the relevant competent authority to mandate contributions of input data,” the statement added.
The EU’s markets watchdog, the European Securities and Markets Authority (ESMA), will coordinate supervision of benchmark administrators by national regulators.
For the most important benchmarks, a college of national supervisors, including ESMA, will be set up and take key decisions under the deal endorsed by EU states on Friday.
EU states will use their agreement as a basis for negotiating a final version of the new law with the European Parliament, which has joint say.
Britain, home to the interest rate and currency benchmarks that banks tried to rig, is already introducing tougher rules and sanctions.
Reporting by Huw Jones; Editing by Mark Potter