EU rows back on plans to regulate benchmarks

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European Union regulators will abandon earlier plans to place commodity and financial benchmarks under the sole watch of a Paris-based regulator when they announce a legal framework to prevent price rigging today.

The draft law, to be presented by the European Union’s regulation chief Michel Barnier, is a central plank of the bloc’s response to the rigging of the London Interbank offered rate (Libor) – a benchmark used to price products from home loans to credit cards worth £189 trillion.

But while the new rules, which will also apply to benchmarks used to set the price of physical commodities such as North Sea Brent crude oil, introduce regulation to an area that thrived beyond the scrutiny, they will chiefly rely on countries to enforce them, according to a draft seen by news agency Reuters.

An earlier suggestion that the European Securities and Markets Authority (Esma), a thinly-staffed fledgling EU body based in Paris, could do alone the job was dropped.

In the draft document, officials instead say that groups of supervisors from different countries, as well as Esma, should exchange information.

The EU’s more gentle legislative response follows total fines of £1.6 billion on Royal Bank of Scotland, Barclays and Swiss bank UBS over the rigging of Libor.