* EU Commission to outline rules following Libor rigging
* New law will also apply to commodity benchmarks
* Earlier plan for central EU supervision pared back
By Barbara Lewis and John O'Donnell
BRUSSELS, Sept 17 EU regulators will abandon
earlier plans to place commodity and financial benchmarks under
the sole watch of a Paris-based regulator when they announce a
legal framework to prevent price rigging on Wednesday.
The draft law, to be presented by the European Union's
regulation chief Michel Barnier, is a central plank of the
bloc's response to the rigging of the London Interbank Offered
Rate (Libor) - a benchmark used to price products from home
loans to credit cards worth $300 trillion.
But while the new rules, which will also apply to benchmarks
used to set the price of physical commodities such as North Sea
Brent crude oil, introduce regulation to an area that thrived
beyond the scrutiny, they will chiefly rely on countries to
enforce them, according to a draft seen by Reuters.
An earlier suggestion that the European Securities and
Markets Authority (ESMA), a thinly-staffed fledgling EU body
based in Paris, could do alone the job was dropped.
In the draft document, officials instead say that groups of
supervisors from different countries, as well as ESMA, should
Industry lobbyists conceded that the European Commission,
which proposes draft EU laws before they are approved by the
bloc's countries and parliament, has softened the rules, but
they still want a further scaling back.
"The EU has watered it down a bit," said one oil industry
executive, speaking on condition of anonymity. "But there are
still some big problems - like requiring price reporting
agencies to make their source sign a code of conduct."
Price assessment agencies Platts, a unit of McGraw-Hill
, and smaller rivals Argus and ICIS, part of Reed
Elsevier, want Brussels to just align with non-binding
"As it makes its way through the European legislative
process, we will continue to work with regulatory and
legislative officials," a spokesman for Platts said.
Argus earlier this year warned that the new rules could make
Following criticism, the draft rules attempt to avoid
imposing liability should the benchmark prove misleading
although lobbyists said that a proposal that participants sign a
code of conduct could scare some off.
The gentle legislative response follows total fines of $2.6
billion on Royal Bank of Scotland, Barclays and
Swiss bank UBS over the rigging of Libor.
The Commission's antitrust chief continues to probe
benchmarks including Libor and has also raided offices of oil
majors Shell, BP and Statoil in an
investigation of suspected manipulation of oil prices.
The European Parliament and EU member states will have to
approve the draft before it become law, a process that could
drag on for years.