European regulators have approved of progress made to reforming the Euribor benchmark in the wake of the Libor scandal.
Following a review of the way the benchmark is set, the European Securities and Markets Authority (ESMA) and the European Bank Authority (EBA) made a number of recommendations over how Euribor should be reformed in January last year.
Euribor-EBF, the organisation that sets the benchmark rate for a range of euro-denominated financial products including derivatives, was found to have significant technical and governance weaknesses. The review followed the discovery in 2008 that banks had been manipulating sterling-based benchmark Libor and other interest rate benchmarks.
A fresh review of Euribor-EBF’s progress has found the organisation has made significant improvements and reforms across all affected areas.
Four of the regulators’ recommendations have already been fully implemented, and a further six have been partially implemented.
Reforms include a recomposition of its steering committee to feature less panel banks and increase meeting frequency. It has also revised its code of conduct effective from 1 October 2013 to set minimum requirements and control mechanisms for submissions by banks.
It has also started to use post-fixing checks and back-testing analysis.
Action to reform Euribor differs from steps taken by UK regulators to improve governance of Libor.
The Financial Conduct Authority and Bank of England opted to strip the British Bankers Association of its role in setting the Libor rate and launched an independent tender process. In January 2014, Intercontinental Exchange (ICE) Group’s ICE Benchmark Administration subsidiary took over responsibility for setting the London benchmark rate.