17.1.2018   

EN

Official Journal of the European Union

L 12/14

(1)

To ensure that competent authorities apply Article 51(4) of Regulation (EU) 2016/1011 in the same manner, it is appropriate to set out in detail under which conditions the competent authorities may conclude that the cessation or changing of an existing benchmark could result in a force majeure event, or could frustrate or otherwise breach the terms of a financial contract or financial instrument, or the rules of an investment fund, referencing an existing benchmark.

(2)

This is in particular the case in the event of a ‘force majeure’, a term which is interpreted in a different manner across the Member States.

(3)

A significantly different value in the index is a major cause of frustration or breach of the terms of any financial contract or financial instrument or the rules of any investment fund, referencing a benchmark. Those significantly different values can be caused by a sudden discontinuity in time series of the index or a different degree of volatility of the index, which in turn can be caused by changes to the methodology for the provision of the benchmark or to the input data on which the benchmark calculation is based. Competent authorities should assess the potential impacts of such changes on a case-by-case basis since the magnitude of the discontinuity or the extent of the change in the volatility of the index depends very much on the nature of the benchmark and of the referencing financial instruments, financial contracts or investment funds.

(4)

Changes to the type of input data used or the reliability of data sources can have an impact on the suitability of a benchmark for certain types of use. Competent authorities should therefore assess whether those changes could cause a force majeure event, or frustrate or otherwise breach contractual terms.

(5)

Force majeure events, the frustration or other breaches of contractual terms are less likely where there is an acceptable substitute benchmark or at least a procedure referenced in the relevant documents to select such a substitute benchmark.

(6)

Indices measuring very particular markets might rely significantly on the reputation, judgement or expertise of the index provider. Competent authorities should therefore assess whether, in those circumstances, a change of the provider of an index could result in a force majeure event, or frustrate or otherwise breach contractual terms,

(a)

changing the benchmark would require a material change to the nature of the input data, to the methodology to determine those data, to the data gathering process itself or to other elements of the benchmark provision, which would lead to a significantly different value of the benchmark;

(b)

changing the nature of the input data or the methodology to determine those data in order to make the benchmark compliant with Regulation (EU) 2016/1011 would undermine the representativeness of the benchmark of the market or the economic reality the benchmark is intended to measure, ultimately causing a change in the nature of the benchmark;

(c)

there is no substitute benchmark for the benchmark that does not meet the requirements of Regulation (EU) 2016/1011 which:

(d)

existing financial contracts, financial instruments and investment funds referencing the benchmark, and their accompanying documents, do not provide for a substitute benchmark or do not contain rules on how such a substitute benchmark shall be determined or any other appropriate contingency measures;

(e)

the transitioning of the benchmark from one administrator to another administrator would lead to a substantial change in the benchmark.