Meginmál

Financial benchmarks

The Act on Fin­an­cial Bench­marks im­ple­ments Reg­u­la­tion (EU) 2016/1011 of the European Par­lia­ment and of the Coun­cil of 8 June 2016 on fin­an­cial bench­marks, here­in­after BMR (Bench­mark Reg­u­la­tion), and amend­ments pur­su­ant to Reg­u­la­tion (EU) 2019/2089 of the European Par­lia­ment and of the Coun­cil of 27 Novem­ber 2019, in Iceland.

Pur­su­ant to Art­icle 13(1) of the Act, the Min­is­ter has is­sued Reg­u­la­tion No.162/2021 on fin­an­cial bench­marks, in ad­di­tion to which the Cent­ral Bank of Ice­land has, in ac­cord­ance with Art­icle 13(2) of the Act, set Reg­u­la­tion No. 752/2021 on fin­an­cial bench­marks.

The reg­u­la­tion ap­plies to both the pre­par­a­tion of bench­marks, in­clud­ing the pro­cessing of in­put data on which they are based, and their use. Bench­marks broadly refer to fig­ures that are ac­cess­ible to the pub­lic, are de­term­ined at reg­u­lar in­ter­vals on the basis of cer­tain val­ues, and are used to de­term­ine pay­ments, the value of fin­an­cial in­stru­ments or the as­set al­loc­a­tion of in­vest­ment funds. Cer­tain spe­cified en­tit­ies are ex­empt from the reg­u­la­tion, in­clud­ing cent­ral banks and en­tit­ies that com­pile bench­marks for pub­lic policy pur­poses.

Parties who con­sider they fall un­der Act no. 7/2021 on fin­an­cial bench­marks are also en­cour­aged to fa­mil­i­ar­ise them­selves with the con­tent of the Act and, as the case may be, im­ple­ment the ob­lig­a­tions stip­u­lated in the Act in their op­er­a­tions, ap­ply for an op­er­at­ing li­cence or re­gister with the Cent­ral Bank.

Dif­fer­ent classes and types of bench­marks

Crit­ical bench­marks are defined in Art­icle 20 of the BMR, but this cat­egory in­cludes cri­teria that meet a cer­tain size or im­port­ance cri­ter­ia. Re­gard­ing size lim­its, the bench­marks that are used dir­ectly or in­dir­ectly in the com­pos­i­tion of the bench­marks are covered un­der Para­graph 1(a) of Art­icle 20 of the BMR, if they are used as a ref­er­ence for fin­an­cial in­stru­ments, fin­an­cial con­tracts or to meas­ure the per­form­ance of in­vest­ment funds and they have a value of at least EUR 500 bil­lion.

Sig­ni­fic­ant bench­marks are defined in Art­icle 24 of the BMR, but this class in­cludes bench­marks that do not meet the size or im­port­ance cri­teria pre­scribed in Art­icle 20 of the BMR for crit­ical bench­marks, but still meet the same cri­teria set out in Art­icle 24 of the BMR. Re­gard­ing size lim­its, the bench­marks that are used dir­ectly or in­dir­ectly in the com­pos­i­tion of the bench­marks are covered un­der Para­graph 1(a) of Art­icle 24 of the BMR, if they are used as a ref­er­ence for fin­an­cial in­stru­ments, fin­an­cial con­tracts or to meas­ure the per­form­ance of in­vest­ment funds, and they have a value of at least EUR 50 bil­lion (but no more than EUR 500 bil­lion, cf. the re­quire­ments of Art­icle 20 of the BM­R).

Non-sig­ni­fic­ant bench­marks are those bench­marks that are not con­sidered crit­ical ac­cord­ing to Art­icle 20 of the BMR, nor sig­ni­fic­ant ac­cord­ing to Art­icle 24 of the BMR.

In­vest­ment Fund

The Cent­ral Bank draws spe­cial at­ten­tion to the fact that the use of the term in­vest­ment fund in the BMR dif­fers from its use in other le­gis­la­tion in the fin­an­cial mar­ket. The term in­vest­ment fund in the BMR refers to both al­tern­at­ive in­vest­ment funds and UCITS.

Op­er­at­ing li­cense or re­gis­tra­tion

The Cent­ral Bank points out in par­tic­u­lar that an ad­min­is­trator of a bench­mark shall ap­ply to the Cent­ral Bank for an au­thor­isa­tion or, as the case may be, re­gister with the Cent­ral Bank when de­term­in­ing the bench­mark, in ac­cord­ance with Art­icle 34 of the BMR.

The gen­eral rule, which is set out in point a of Art­icle 34(1) of the BMR, is that parties must ap­ply for an au­thor­isa­tion to be the ad­min­is­trator of the provided bench­marks within the mean­ing of this Reg­u­la­tion. There are two ex­cep­tions to this prin­ciple: stip­u­lated on one hand in point b of Art­icle 34(1), which states that it is pos­sible for reg­u­lated en­tit­ies to re­gister as an ad­min­is­trat­or, provided cer­tain con­di­tions are met and, on the other hand, in point c of Art­icle 34(1) which states that a party can re­gister if none of the in­dices it in­tends to provide would qual­ify as a crit­ical bench­mark.

Su­per­vised en­tity means any of the en­tit­ies lis­ted in points a to m un­der item 17 of Art­icle 3(1) of the BMR.

Use of the bench­marks

The use of a bench­mark refers to one of the items lis­ted in item 7 of Art­icle 3(1) of the BMR. This in­cludes i.a. meas­ur­ing the per­form­ance of an in­vest­ment fund through an in­dex or a com­bin­a­tion of in­dices for the pur­pose of track­ing the re­turn of such in­dex or com­bin­a­tion of in­dices, of de­fin­ing the as­set al­loc­a­tion of a port­fo­lio, or of cal­cu­lat­ing the per­form­ance-linked fees.

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