* EU's Barnier pares back ambition on EU oversight
* Earlier plans for blanket legal liability softened
* Industry warns new rules could undermine commodities
By John O'Donnell and Barbara Lewis
BRUSSELS, Sept 18 European Union regulators
proposed new rules on Wednesday on how commodity-price and
interest-rate benchmarks are set, but the plans are a paring
back of original ambitions for greater EU oversight of the
The draft law, presented by the EU's regulation chief Michel
Barnier, is a central element 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.
It will also affect how the price of commodities, including
North Seat Brent crude, a critical oil benchmark, are set.
Although the legislation introduces regulation to an area
that has until now thrived beyond such scrutiny, it will chiefly
rely on countries and their national authorities, in London and
elsewhere, for enforcement.
The rules row back on earlier plans for blanket legal
liability on those who contribute data to set prices, although
there is provision for sanctions as well as a legally binding
code of conduct that has worried some in the commodities
industry that this could undermine their price setting.
"Benchmarks are at the heart of the financial system: they
are critical for our markets as well as the mortgages and
savings of millions of our citizens, yet until now they have
been largely unregulated and unsupervised," said Barnier.
"Today's proposals will ensure for the first time that all
benchmark providers have to be authorised and supervised; they
will enhance transparency and tackle conflicts of interest."
The announcement fell short of what some lawmakers in
Brussels had hoped for, while many in the commodities industry
felt it went too far and could undermine the benchmarks they use
to determine prices. The rules will also apply to benchmarks
used to set the price of physical commodities such as North Sea
Brent crude oil.
Price assessment agencies Platts, a unit of McGraw-Hill
, and smaller rivals Argus and ICIS, part of Reed
Elsevier, want Brussels to align merely with non-binding
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
"It's disappointing," said Sven Giegold, a German member of
the European Parliament. "The Commission has given in to British
demands to keep oversight of Libor and that is a mistake."
"The national supervisors didn't catch previous manipulation
and I would expect more independence from a European Authority,"
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.
Industry lobbyists conceded that the European Commission,
which proposes draft EU laws for approval by the bloc's
countries and parliament, has softened the rules, but they still
want a further scaling back.
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 investigate
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.