The European Parliament yesterday voted to support common EU standards against the manipulation of financial benchmarks.

The Regulation on financial benchmarks will improve the governance of indices or indicators used to price financial instruments and financial contracts or to measure the performance of an investment fund. They are often used in financial instruments such as bonds, shares and derivatives and determine mortgage payments for consumers. The new rules are designed to protect investors and consumers.

“Manipulating benchmarks is tantamount to stealing”

EU Commissioner for Financial Stability, Financial Services and Capital Markets Union Jonathan Hill said: “Benchmarks are vital for the functioning of our financial markets. Manipulating benchmarks is tantamount to stealing from investors and consumers. So I welcome today’s vote in the European Parliament, which means we now have new rules that will help rebuild confidence in financial markets in the European Union.”

The adoption of the regulation was approved by a large majority in the plenary session and the regulation will come into effect sometime in May 2016.

No more Libor rigging

The regulation aims to ensure that financial benchmarks, such as the London interbank offered rate (Libor) and the Euro interbank offered rate (Euribor), are not subject to manipulation, following the Libor scandal that was reported in the Financial Times in July 2012. Barclays Banks was consequently fined by the Financial Services Authority and the US Department of Justice, while Barclays chairman Marcus Agius and CEO Bob Diamond both resigned following the interest rate rigging scandal. Numerous other banks were also fined, including UBS, Citigroup, Deutsche Bank, Royal Bank of Scotland and JPMorgan.

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CTMfile take: The Libor rigging scandal was a serious blow to confidence in the financial markets and in financial institutions. This regulation is hopefully a move towards greater transparency and trust in financial services in the EU.