RBI releases Financial Benchmark Administrators (Reserve Bank) Directions, 2019

Jun 27, 2019 | by Avantis RegTech Legal Research Team

The Reserve Bank of India (RBI) on June 26, 2019, has released the Financial Benchmark Administrators (Reserve Bank) Directions, 2019 under the provisions of RBI Act, 1934. The Financial Benchmark Administrators (FBAs) administering significant benchmarks shall adhere to these directions to ensure that accepted standards of governance, quality of benchmarks, quality of methodology and accountability in respect of the benchmark administration process are duly observed. A significant benchmark shall be based on use, efficiency and relevance of the benchmark in domestic financial markets. It will come into force with effect from June 26, 2019. These directions shall apply to Financial Benchmark Administrators administering ‘significant benchmarks’ in the markets for financial instruments regulated by the Reserve Bank and the benchmarks administered outside India do not fall under the scope of these directions.

Eligibility criteria for FBAs:

1) FBA shall be a company incorporated in India.

2) FBAs shall maintain a minimum net worth of Rs 1 crore at all times.

Authorized FBAs shall adhere to the following directions for administering ‘significant benchmarks’:

1) The ‘significant benchmarks’ administered by them, shall be responsible for:

a. formulation of the benchmark calculation methodology;

b. determination of the benchmark values;

c. dissemination of the benchmark values;

d. ensuring transparency in the benchmark administration;

e. periodic review of the benchmark; and,

f. putting in place necessary organizational and process controls for effectively carrying out the above responsibilities.

2) Formulation, Determination and Review  of Significant Benchmarks

3) Organizational and Process Controls (Role of Oversight Committee): FBAs shall develop an appropriate oversight function for regular review of various aspects of the significant benchmark determination process. The oversight function shall be carried out by a committee, to be called ‘Oversight Committee’.

4) Internal Control: FBAs shall ensure effective controls over data collection, storage, processing and dissemination to maintain data security, confidentiality and integrity.

5) Outsourcing of ‘significant benchmark’ related work: FBAs shall put in place transparent written policies setting out the roles and obligations of any agency to which it outsources work to act as a calculating agent or any other function that affects the value of the benchmark and regularly monitor their compliance with the policies.

6) Complaint Management: FBAs shall have a formal mechanism to handle the complaints related to ‘significant benchmark’ administration. 

7) Data Preservation: FBAs shall preserve all data in their possession in connection with ‘significant benchmarks’ for a period of ten years from the date of receipt/creation of data. 

8) Exemption from the provisions of these directions: The Reserve Bank may exempt an FBA either generally or for such period as may be specified, from any or all of the provisions of these Directions, subject to such terms or conditions or limitations or restrictions as it may think appropriate, in the interest of public or financial system of the country.

9) Revocation of authorization: The Reserve Bank may revoke the authorisation granted to an FBA for administration of one or more ‘significant benchmarks’, based on adverse findings or observations or material violation of any of the provisions of these directions or any condition of authorization.

10) Transition or Termination of administration: FBA may terminate its operation with prior approval of the Reserve Bank and shall comply with the terms and conditions stipulated by the Reserve Bank.

11) Benchmark Publication: FBAs shall make public the ‘significant benchmarks’, either on the day of its release or with a lag not exceeding 15 days from the release.

12) Reporting: FBAs shall submit to the Reserve Bank such data and reports within such timelines and in such formats as advised from time to time.

[Notification No. FMRD.FMSD.18/2019]

Click here to download the Notification.


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