ESMA updates Benchmarks Regulation Q&As on use of critical benchmarks

ESMA has recently updated its Q&As on the Benchmarks Regulation (BMR) with confirmation on how long EU supervised entities can use a benchmark which has been recognised as a critical benchmark under Article 20 of the BMR, where the index provider has not been granted authorisation.

Article 51 of the BMR allows:

• an EU index provider to continue to provide an existing critical benchmark until 31 December 2021;
• a supervised entity to use an existing critical benchmark provided by an EU index provider for;
  • existing and new financial instruments;
  • financial contracts; or
  • measuring the performance of an investment fund

until 31 December 2021.

In each case, this is subject to the proviso that, where an index provider has submitted an application for authorisation, the benchmark can be provided or used unless and until authorisation is refused.

ESMA considers that the term existing benchmark means "existing on or before 10 December 2019" (being the date on which Article 51(4a), which refers to existing benchmarks started to apply).

The update confirms that:

• supervised entities can use a critical benchmark which existed on or before 10 December 2019 (including its updates and modifications) until 31 December 2021. This is the case even if the critical benchmark has been transferred to a new index provider after 10 December 2019; and
• to use the benchmark after 31 December 2021, its index provider must apply for an authorisation before that date. That said, if the application for authorisation is refused before 31 December 2021, the relevant critical benchmark can no longer be used.