On 30 August 2013, the Norwegian Ministry of Finance (the “NMF”) instructed the Financial Supervisory Authority of Norway (the “FSAN”) to prepare a draft consultation paper setting forth i.a. proposed regulations for the determination of interest rate benchmarks. On 31 March 2014, the FSAN published its consultation paper.
The finance industry is currently adapting to the ESMA-EBA Principles for Benchmark-Setting Process and the IOSCO’s principles for financial benchmarks. Further there is an ongoing legislative process within the EU, expected to result in a financial benchmark regulation. Such regulation will presumably be made part of the EEA Agreement and thus become implemented in Norway as well. With the details and timing of the benchmark regulation being somewhat uncertain, and pending such regulation, the FSAN has proposed to establish an overriding framework giving a legal basis for the authorities to supervise – and to pass detailed regulations in respect of – applicable generally applied interest rate benchmarks.
Pursuant to the proposal, the determination of generally applied interest rate benchmarks based on quotations from financial institutions shall be prudently organized, and the administrator and organisation shall be approved by the NMF.
The determination of the interest rate benchmark shall be subject to supervision of the FSAN. The NMF may lay down further regulations with respect to i.a. governance, input data, methodology, documentation and code of conduct.
The proposal will imply that Finance Norway, the current administrator for the determination of NIBOR, and its organisation of such determination, will need approval by the NMF. Except for the administrator, no participant in the determination of interest rate benchmarks will be subject to an approval process. The FSAN deems that the approval process regarding the organisation will include a basis to lay down requirements with respect to the performance of sub functions and with respect to contributors (e.g. panel banks). The panel banks are further subject to the supervision of the FSAN (and, with respect to foreign panel banks operating in Norway through branches, also of its local financial supervisory authority).
Should the proposal be passed, further changes to the legislation and more detailed regulations should be expected following the implementation of the benchmark regulation.