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BMR ToolDelegated Regulation 2021/1349
Article 2

Article 2 - Criteria for assessing the cessation of the provision of a critical benchmark

Article 2

Criteria for assessing the cessation of the provision of a critical benchmark

1.   Competent authorities shall, when assessing how a critical benchmark is to be ceased to be provided, consider all of the following criteria:

(a)

the effectiveness of the procedure established in accordance with Article 28(1) of Regulation (EU) 2016/1011, and in particular:

(i)

whether that procedure precisely defines the actions to be taken by the administrator to cease in an orderly fashion the provision of the critical benchmark;

(ii)

whether, considering the circumstances of the specific case, those actions will be adequate to ensure the cessation in an orderly fashion of the provision of the critical benchmark, having also regard to the criterion referred to in point (b) of this paragraph;

(iii)

when that procedure was produced and when it was last updated;

(b)

the written plans referred to in Article 28(2) of Regulation (EU) 2016/1011 and in particular:

(i)

whether those written plans nominate suitable alternative benchmarks that can be referenced to substitute the critical benchmark and, if so, whether those written plans nominate the same or different alternative benchmarks;

(ii)

where those written plans nominate the same alternative benchmark, whether that benchmark has been adopted in different asset classes;

(iii)

whether the trigger events for the cessation of the provision of critical benchmark included in the written plans are the same among the plans produced by the supervised entities using that critical benchmark, where it is feasible to assess this;

(c)

whether the administrators of the alternative benchmarks referred to in point (b)(i) of this paragraph are authorised;

(d)

where feasible, whether the cessation of the provision of the critical benchmark would have an adverse impact on the market integrity, financial stability, consumers, the real economy, or the financing of households and businesses (4);

(e)

whether the cessation of the provision of the critical benchmark would result in a force majeure event;

(f)

the dynamics of the market or economic reality that the critical benchmark intends to measure and whether there exists input data of sufficient quality and quantity to represent that underlying market or economic reality with precision;

(g)

whether the administrator has informed any contributors to the critical benchmark, users of that benchmark and other stakeholders or has conducted public consultations about the possible cessation of the provision of the critical benchmark;

(h)

any legal risks involved in the cessation of the provision of the critical benchmark;

(i)

the accounting and tax implications of the cessation of the provision of the critical benchmark;

(j)

the impact of the cessation of the provision of the critical benchmark on market infrastructures, including clearing houses.

For the purposes of point (c), where the administrators of the alternative benchmarks referred to in point (b)(i) of this paragraph are not authorised, the competent authority shall assess the conditions of their authorisation under Article 34 of Regulation (EU) 2016/1011 and shall assess whether a period of mandatory administration of the critical benchmark is necessary to allow for authorisation of the administrators of those alternative benchmarks.

2.   In addition to the criteria referred to in paragraph 1, point (a), a competent authority may assess whether the procedure established by the administrator in accordance with Article 28(1) of Regulation (EU) 2016/1011 is appropriate having regard to the following elements concerning the financial instruments, financial contracts or investment funds which reference the critical benchmark:

(a)

their volume and value;

(b)

the term, duration, maturity or expiry date of the financial instruments, financial contracts and any other document entered into for 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 computing the performance fees;

(c)

whether the critical benchmark will continue to be provided for use during a transitional or run-off period;

(d)

whether the procedure referred to in Article 28(1) of Regulation (EU) 2016/1011 provides for such changes to the critical benchmark as may be necessary to ensure that the critical benchmark remains reliable and representative of the underlying market or economic reality which it intends to measure throughout the period referred to in subparagraph 2(c) of this Article;

(e)

the likelihood that any such financial instrument, financial contract or other document entered into for 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 computing the performance fees would be frustrated or that its terms would be breached in the event of the cessation of the provision of the critical benchmark.

(4)  Commission Delegated Regulation (EU) 2018/64 of 29 September 2017 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to specifying how the criteria of Article 20(1)(c)(iii) are to be applied for assessing whether certain events would result in significant and adverse impacts on market integrity, financial stability, consumers, the real economy or the financing of households and businesses in one or more Member States (OJ L 12, 17.1.2018, p. 5).