Last July, Draft Law No. 7861 (the “Draft Law”) was published containing proposed amendments to the Law 17 April 2018 (the “Benchmark Law”) that had implemented Regulation (EU) 2016/1011 of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds amending Directives 2008/48/EU and 2014/17/EU and Regulation (EU) 596/2014 (the “Benchmark Regulation”).
The draft law is aimed at aligning the Luxembourg legislative framework with the amendments introduced to the Benchmark Regulation by the following Regulations:
- Regulation 2021/168 that introduced, among others and in the context of the cessation of LIBOR, provisions for the orderly termination of a benchmark; in order to reduce the legal uncertainty and the connected potential impacts on market integrity and financial stability, this Regulation provides for a replacement of certain benchmarks (mainly the critical benchmarks and the significant benchmarks) by EU or national law;
- Regulation 2019/2175 that provides for ESMA to be, as of January 2022, the supervisory authority for the critical benchmarks and for the authorisation of benchmark administrators located in third countries;
- Regulation 2019/2089 that introduced provisions with regard to the EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks.
The amendments concern, mainly:
- the designation of ESMA (instead of the CSSF) as the competent authority for the supervision of critical benchmark and for the authorisation of the benchmark administrators located in third countries;
- the designation of the CSSF as the competent authority for the replacement of a benchmark under Article 23 quater of the amended Benchmark Regulation;
- the designation of the CSSF as the competent authority for the assessments and the declarations under Articles 23 ter, par. 7 and 5a (assessment for establishing if a benchmark agreed as a contractual fallback rate no longer reflects or significantly diverges from the underlying market), 23 ter, par. 2a and c (declarations announcing that the benchmark no longer reflects the underlying market or that the relevant administrator is commencing a wind-down procedure, to be acquired from the competent authority in the context of the designation by the European Commission of one or more replacements) and Article 23 quater, par. 1 a and c of the same Regulation (declarations announcing that the benchmark no longer reflects the underlying market or that the relevant administrator is commencing a wind-down procedure, in the context of the designation by the National Authority of one or more replacements);
- the alignment of Article. 4 of the Benchmark Law, regarding the case in which the CSSF may dispose administrative sanctions, by referring to the provisions concerning the EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks.