The endorsement route has a number of preconditions that may make it more difficult for third country benchmark administrators.
In effect, an authorised or registered benchmark administrator in the EU can endorse a third country benchmark for use in the European Union.
GRSS intends to offer endorsement via its 100% subsidiary, Czech Financial Benchmark Facility s.r.o, (CFBF) the benchmark administrator for PRIBOR once it is authorised later in 2018.
This endorsement option is only available to be provided by registered and authorised benchmark administrators in the EU and as yet there are not many that have achieved this. The CFBF intends to be one of the first in Europe to achieve authorisation.
Endorsement requires the benchmark administrator in Europe to effectively ensure that the third country benchmark meets all the equivalence of the EU regulation. GRSS can assist in understanding the implications of this with regards to this option.
From a project planning perspective, these are the steps necessary to go through to meet the Endorsement route. The BMR stipulates timeframes for decisions to approve by the EU member state competent authority, but all other steps are not defined by any time restraints.
The steps necessary to meet Endorsement are as follows;
An authorised or registered administrator within the EU or any other EU located supervised entity (with a clear and well-defined role within the control or accountability framework of the third country administrator) able to monitor the provision of the benchmark may apply to the relevant competent authority to endorse a benchmark provided in a third country for use within the EU provided all conditions are met
Endorsing administrator can confirm on an ongoing basis to its competent authority that the provision of the benchmark fulfils at least as stringent as BMR (equivalent to IOSCO Principles)
Endorsing administrator has the expertise to monitor the provision of the benchmark and manage associated risks
Objective reason for the benchmark to be provided in the third country and for the use of the benchmark in the EU
All information must be provided
Competent authority decision within 90 days
An endorsed benchmark shall be considered to be a benchmark provided by the endorsing administrator
An endorsing administrator shall remain fully responsible for the endorsed benchmark and for compliance with the obligations of BMR
Competent authority has the power to cease endorsement
The European Commission empowered to adopt delegated acts concerning how competent authorities assess whether there is an objective reason for the provision of the benchmark in the third country and for its endorsement for use in the EU. Such elements as underlying market or economic reality measured, proximity of the benchmark to the market being measured, proximity to contributors, input data availability due to different time zones and specific skills required for the provision of the benchmark.
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