Financial benchmarks are intrinsic to the smooth functioning of every major financial market across all asset classes. Benchmarks are also essential in the execution of public monetary and economic policy, helping to transmit policy objectives through trillions of dollars of market activity. Current regulatory and market initiatives are likely to result in new targeted regulation and enhanced requirements for benchmark sponsors and data contributors in governance, operating controls, and benchmark design.
Several broad reform principles have already emerged. Many jurisdictions will regulate benchmark activities, including sponsorship and data contribution, which will require strong governance and tight and auditable controls on benchmark determination and data submission. Benchmarks may be redesigned to more accurately reflect underlying markets and make increased use of data from actual transactions. These reforms are vital to maintain public confidence in benchmarks, but present implementation and cost challenges to benchmark sponsors and market participants.
With its teams of industry leaders and regulatory experts, Promontory is uniquely positioned to assist clients in implementing reform requirements, including benchmark design, independent assurance, gap analyses against emerging standards, and look-back investigations. Promontory has advised several benchmark sponsors, data contributors, and industry associations on a variety of benchmark issues, including policy development, operational assurance, and investigative reviews. The firm has a unique operational facility dedicated to benchmark-review activities, using sophisticated technology to support investigative and assurance programs.