SUMMARY OF QUESTIONS
Chapter 1. Indices and Benchmarks: What they are, who produces them and for which purposes
a) Which benchmarks does your organisation produce or contribute data to?
Euribor, USD Euribor, Eonia and different benchmarks of spanish mortgage rates.
(2) Which benchmarks does your organization use? What do you use each of these
benchmarks for? Has your organization adopted different benchmarks recently and if so why?
a) Euribor, USD Euribor, Eonia, Libor, equity indexes and different benchmarks of spanish mortgage rates.
b) The interest rate benchmarks are used mainly to fix the rate of the floating rate loan portfolio, to fix the rate of the floating rate deposits and to fix the floating rate leg of many derivatives. The equity indexes are used to determine the pay out of structured products.
c) No
3 Have you recently launched a new benchmark or discontinued existing ones?
No.
(4) How many contracts are referenced to benchmarks in your sector? Which persons or entities use these contracts? And for which purposes?
a. We do not have the exact amount of contracts at a sector level, but it is a huge amount, several trillion EUR linked to 12m Euribor mainly.
b. The end users of the contracts are both bank customers and the bank itself for its own account.
(5) To what extent are these benchmarks used to price financial instruments? Please provide a list of benchmarks which are used for pricing financial instruments and if possible estimates of the notional value of financial instruments referenced to them.
a) These benchmarks are widely used as they are an important element for the pricing of financial instruments.
b) The list of benchmarks is wide and include Euribor, Libor, Eonia, equity indexes, inflation indexes and credit default swaps indexes.
c) The notional value of financial instruments referenced to them is of several trillion EUR.
(6) How are benchmarks in your sector set? Are they based on real transactions, offered rates or quotes, tradable prices, panel submissions, samples? Please provide a description of the benchmark setting methodology.
The banking sector uses indexes calculated according to different methodologies:
a) Real transactions: equity indexes, EONIA
b) Offered rates: LIBOR
c) Panel submissions: EURIBOR
d) Quotes: CDS indexes, as ITRAXX
(7) What factors do you consider to be the most important in choosing a reliable benchmark? Could you provide examples of benchmarks which incorporate these factors?
For us the most important factor for an index to be considered a reliable benchmark is to be based as much as possible in real transactions, like equity indexes or EONIA.
Chapter 2. Calculation of Benchmarks: Governance and Transparency.
(8) What kinds of data are used for the construction of the main indices used in your sector? Which benchmarks use actual data and which use a mixture of actual and estimated data?
As answered in (6) the sector uses indexes based on different kind of data, but we are not aware of an index that uses a mixture of actual and estimated data.
(9) Do you consider that indices that do not use actual data have particular informational or other advantages over indices based on actual data?
Indices that do not use actual data have the advantage of always having a quote, even in the case that there is no traded or data observation.
(10) What do you consider are the advantages and disadvantages of using a mixture of actual transaction data and other data in a tiered approach?
The main disadvantage may be the volatility in the daily quotes due to changes in the level of prices that may happen depending of the use of actual or estimated data.
The main advantage would be that estimated data should be better anchored to actual data.
(11) What do you consider are the costs and benefits of using actual transactions data for benchmarks in your sector? Please provide examples and estimates.
One good example would be Euribor quotes, which are based on estimated data. Due to market fragmentation, Euribor rates no longer reflect financial conditions of the different countries of the Eurozone. The use of actual data should better reflect the interest rates in the different countries where Panel Banks are based.
(12) What specific transparency and governance arrangements are necessary to ensure the integrity of benchmarks?
Benchmarks Codes of Conduct should be as detailed as possible and sponsors governance should be supervised by an official institution.
(13) What are the advantages and disadvantages of imposing governance and transparency requirements through regulation or self-regulation?
Private sector sponsored benchmarks used in retail client contracts should be monitored by an official supervisor to ensure contributors take its role thoroughly and with reasonable internal controls. On the other hand, an excess of official regulation may be an obstacle to promotion of new benchmarks.
(14) What are the advantages and disadvantages of making contributing data or estimates to produce benchmarks a regulated activity? Please provide your arguments.
Please see (13).
(15) Who in your sector submits data for inclusion in benchmarks? What are the current eligibility requirements for benchmarks' contributors?
Contributions are made by teams with the best knowledge of the underlying data of the benchmark and with no conflicts of interest with other areas of the company.
(16) How should panels be chosen? Should safeguards be provided for the selection of panel members, and if so which safeguards?
Panels should be geografically diversified, members should adhere to the benchmark Code of Conduct and have enough human and material resources to perform their task.
(17) How should surveys of data used in benchmarks be performed? What safeguards are necessary to ensure the representativeness and integrity of data gathered in this way?
Data surveys would be easily done if the benchmark has an official supervisor. Benchmarks based on actual data are usually more representative.
(18) What are the advantages and disadvantages of large panels? Even in the case of large panels could one panel member influence the benchmark?
Benchmarks with large panels are more difficult to be influenced by a single member. Those benchmarks should undertake enough safeguards in order to ensure that all panel members are representative and with sufficient knowledge.
(19) What would be the main advantages and disadvantages to auditing of panels? Please provide examples.
Auditing panels should force contributors to take its role thoroughly and with reasonable internal controls.
(20) Where indices rely on voluntary contributions, do you consider that there are factors which may discourage the making of these contributions and if so why?
Yes, we think that benchmarks should rely on mandatory contributors in order to make benchmark data reliable enough.
(21) What do you consider to be the advantages and disadvantages of mandatory reporting of data? Please provide examples.
Voluntary contributors may not assign enough resources to the contribution of data for the benchmark, so data may be less reliable.
(22) For entities contributing to benchmarks which are regulated by financial regulation, what would be the advantages and disadvantages of bringing their benchmark submissions under the scope of this framework?
Please see (13).
(23) Do you consider that responsibility for making adjustments if inadequate data is available should rest with the contributor of the data, the index provider or the user of the index?
The responsibility of adjustments should rest on the contributor.
(24) What is the formal process that you use to audit the submissions and calculations?
Submission processes are subject to regular controls by an independent Internal Audit team.
(25) If there are any weaknesses identified in the audit, who are they reported to and how are they addressed? Is there a follow up process in place?
Internal Audit conclusions are reported to the top management of the company. Weaknesses must be addressed in a short time frame and there is a follow up process.
(26) How often are submissions audited, internally or externally, and by what means? Do you consider the current audit controls are sufficient? What additional validation procedures would you suggest?
The submission process is audited regularly and we consider those controls as sufficient.
(27) What are the advantages and disadvantages of a validation procedure? Please provide examples.
The main advantage of regular audits is to verify the constant compliance with the Code of Conduct of benchmark contributors.
(28) Who should have the responsibility for auditing contributed data, the index provider or an independent auditor or supervisor?
The responsibility for auditing contributed data could rely both on an independent auditor or a supervisor.
(29) What are the advantages and disadvantages of making benchmarks a regulated activity? Please provide your arguments.
Please see (13).
Chapter 3: The Purpose and Use of Benchmarks
(30) Is it possible and desirable to restrict the use of benchmarks? If so, how, and what are the associated costs and benefits? Please provide estimates.
No, we think it is not possible nor desirable to restrict the use of benchmarks.
(31) Should specific benchmarks be used for particular activities? By whom? Please provide examples.
The use of specific benchmarks for particular activities should not be regulated. Industries and business must be free to decide which benchmark to choose.
(32) Should benchmarks developed for wholesale purposes be used in retail contracts such as mortgages? How should non-financial benchmarks used in financial contracts be controlled?
Benchmarks used in retail contracts should have an official supervisor. Most of non-financial benchmarks used in financial contracts are provided by official or public institutions which already have a well defined calculation process.
(33) Who should have the responsibility for ensuring that indices used as benchmarks are fit for purpose, the provider, the user (firms issuing contracts referenced to benchmarks), the trading venues or regulators?
Firms issuing contracts referenced to benchmarks should be responsible that they are fit for purpose.
Chapter 4: Provision of Benchmarks by Private or Public Bodies
(34) Do you consider some or all indices to be public goods? Please state your reasons.
Benchmarks used in retail contracts should have an official supervisor in order to avoid doubts about its lawfulness.
(35) Which role do you think public institutions should play in governance and provision of benchmarks?
Benchmarks should be provided both by public and private sector. Benchmarks used in retail financial contracts should have an official supervisor.
(36) What do you consider to be the advantages and disadvantages of the provision of indices by public bodies?
We do not see advantages or disadvantages of the provision of indices by public bodies or the private sector. Contribution to indices should be made by the contributor with the best knowledge of the underlying data.
(37) Which indices, if any, would be best provided by public bodies?
Please see (36).
Chapter 5: Impact of Potential Regulation: Transition, Continuity and International Issues.
(38) What conflicts of interest would arise in the provision of indices by public bodies? What would be the best way of avoiding these conflicts of interest?
It is essential that public bodies providing indices are completely independent of governments.
(39) What are the likely transition challenges, costs and timelines for relevant benchmarks? Please provide examples.
(40) How do you consider that the adoption of new benchmarks could be ensured? Is this best framed in terms of encouraging or mandating the use of particular benchmarks?
Please see (31).
(41) How can reforms of the regulation of benchmarks be most easily implemented?
A consultation process with all parts involved should be implemented .
(42) What positive or negative impacts, if any, do you see on small and medium-sized enterprises of the possible regulation of indices, and how could any negative impacts be mitigated?
Regulation should make indices more robust and transparent which is an advantage for SMEs and all users.
(43) Are there other impacts which should be considered? If so please specify the nature of these impacts and provide evidence.
It is important to consider that an excess of official regulation may be an obstacle to promotion of new benchmarks.
(44) In which countries are benchmarks used in your sector produced? From which countries are data used for the production of benchmarks in your sector sourced? In which countries are benchmarks used in your sector used?
(45) Are there non-EU benchmarks which could serve as substitutes? Are there non-EU benchmark providers which could produce similar benchmarks?
a) No
b) Yes
(46) Are there international benchmarks which could serve as substitutes for national benchmarks?
No.