EU reduces scope of Benchmarks Regulation

Key points

On 19 May 2025, EU Regulation 2025/914 amending the EU Benchmarks Regulation¹  (EU BMR) was published in the Official Journal of the EU. It will enter into force on 8 June 2025 but the amendments will only apply from 1 January 2026.

Key changes include:

• non-significant benchmarks will be de-scoped;
• EU administrators may opt into the regime for non-significant benchmarks that exceed a EUR 20 billion EU use threshold;
• significant benchmarks must be approved within 60 days or replaced in financial instruments;
• administrators that are on the ESMA register, or are part of a group that includes one, must disclose ESG-related information for all their benchmarks;
• systemically important third-country FX spot rates will be exempted; and
• the ESMA benchmarks register will become a "golden source" of information on approved administrators and their benchmarks.

The broad reduction in scope will mean fewer non-EU administrators requiring EU approval, smoothing the transition for supervised entities currently using third-country benchmarks that would otherwise be prohibited after 2025.

The European Commission has also published a series of FAQs.

De-scoping of non-significant benchmarks

The EU BMR categorises benchmarks as "critical", "significant", or "non-significant", based on their use in the EU.

Non-significant benchmark administrators are currently subject to reduced obligations under the EU BMR, but they still need to be authorised and produce compliance statements for their benchmarks. From 1 January 2026, non-significant benchmarks will no longer be within scope of any part of the EU BMR, so firms that only administer non-significant benchmarks will not need to comply.

Continuing ESG disclosure

The exception to this broad de-scoping is that, if an administrator is on the ESMA register or in the same group as a registered administrator, it will need to disclose certain ESG-related information in respect of all its benchmarks, including those that are not significant.

This carve-in of ESG disclosure is indicative of the EU's continued scrutiny of benchmarks that purport to pursue ESG-related objectives, and its intention to reduce actual or perceived greenwashing in this area.

Multiple designation routes

Under the new regime, a benchmark can be categorised as "significant" in the following ways:

1. by exceeding the EUR 50 billion use threshold;
2. because it is systemically important and the alternatives are not viable;
3. where its administrator voluntarily opts in (subject to a use threshold of EUR 20 billion).

Replacement of prohibited benchmarks

Administrators of significant benchmarks must apply for EU approval within 60 days, or use of the benchmark may be prohibited (with a discretionary transition period of 6 to 24 months). Affected benchmarks must then be replaced in existing financial instruments within six months, unless no viable alternative exists.

Use prohibitions must be clearly and prominently disclosed in relevant prospectuses.

Designation time limits

Benchmarks that are on the ESMA register on 31 December 2025 can be designated as significant until 31 September 2026. Thereafter, they will be "safe" from designation and can be removed from the register without consequence. In practice, this means that administrators of such benchmarks will need to retain their existing approvals until October 2026.

If a newly out-of-scope benchmark is scoped back in, grandfathering provisions will apply so that the administrator is able to rely on its existing authorisation without having to re-apply.

Third-country FX spot rate exemption

The European Commission will be required to exempt third-country FX benchmarks that (i) are subject to currency controls, and (ii) are systemically important or have no equivalent EU alternative.

An initial list of exempted benchmarks is expected by 9 June 2026 and FX benchmark administrators will be exempted from the EU BMR until then.

This exemption will be welcomed in particular by the derivatives market, as any restriction on the use of third-country FX rates would hamper market participants' ability to hedge exchange rate risk.

EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks

All EU CTBs and EU PABs will be regulated as significant benchmarks, so their use in the EU will only be permitted if the administrator or endorsing entity is on the ESMA register. The names of such benchmarks will need to include the term "CTB" or "PAB".

The European Commission had originally proposed limiting these categories of benchmark to EU administrators only. The change in position underscores ESMA's concerns around the availability of ESG-related benchmarks in the EU, and will be welcomed by EU supervised entities that need access to a range of ESG-related benchmarks.

Changes to the ESMA register

The ESMA register will act as a "golden source" of information for potential users of benchmarks, containing all the information about a benchmark and its administrator that EU supervised entities need to determine whether it is available for use in the EU.

Interaction with EU prospectus regime

Where a financial instrument references a proprietary index, the prospectus must include specific information about the index. If the administrator is on the ESMA register only limited detail is required; if not, the prospectus must either describe the index or indicate that relevant information is available on the issuer’s website.

From 1 January 2026, administrators of proprietary indices will no longer be in scope of the EU BMR, so will not be on the ESMA register. This could result in a shift of disclosure obligations from the index administrator to the issuer(s) of relevant securities.

UK position

Until now, the UK BMR and the EU BMR have been largely aligned, including in terms of their broad scope. There are no official plans to amend the UK BMR, and in 2024 the regime's third-country transitional regime was extended until 30 December 2030, suggesting that reform in this area is not high on the UK Government's legislative agenda.

The EU's changes will cause a significant divergence between the two regimes, increasing operational complexity and costs for administrators and users alike.