Financial Regulation Updates in Iceland: Benchmark Regulation Implemented

The Icelandic government has implemented the Act on Financial Benchmarks, which aims to implement Regulation (EU) 2016/1011 on financial benchmarks and amendments made by Regulation (EU) 2019/2089. The new regulations apply to both the preparation and use of financial benchmarks.

Categories of Benchmarks

The regulation defines three categories of benchmarks:

• Critical Benchmarks: Those used directly or indirectly in the composition of other benchmarks with a value of at least EUR 500 billion.
• Significant Benchmarks: Those with a value between EUR 50 billion and EUR 500 billion.
• Non-Significant Benchmarks: Those that do not meet the above criteria.

Regulation and Guidelines

The Central Bank of Iceland has issued Regulation no. 752/2021 on financial benchmarks, which sets out the rules for the preparation and use of benchmarks. The regulation applies to all entities involved in the production and dissemination of benchmarks, including:

• Administrators
• Contributors
• Users

Implementation Obligations

Entities that consider themselves subject to the Act are encouraged to familiarize themselves with its content and implement the necessary obligations in their operations.

Parties can apply for an operating license or register with the Central Bank as required by Article 34 of the Act.

Practical Information and Resources

Practical information on the Act and regulations can be found online, along with guidelines from the European Securities and Markets Authority (ESMA) and answers to frequently asked questions.

Use of Benchmarks

The regulation provides guidance on the use of benchmarks, including:

• Measuring the performance of investment funds
• Defining asset allocation
• Calculating performance-linked fees

By implementing this new regulation, Iceland is ensuring a robust framework for financial benchmarking, promoting transparency and stability in the financial markets.