(5)

in Title III, the following chapter is inserted: ‘CHAPTER 4A Statutory replacement of a benchmark Article 23a Scope of the statutory replacement of a benchmark This Chapter applies to: (a) any contract, or any financial instrument as defined in Directive 2014/65/EU, that references a benchmark and is subject to the law of one of the Member States; and (b) any contract, the parties to which are all established in the Union, that references a benchmark and that is subject to the law of a third country and where that law does not provide for the orderly wind-down of a benchmark. Article 23b Replacement of a benchmark by Union law 1. This Article shall apply to: (a) benchmarks designated as critical by an implementing act adopted pursuant to point (a) or (c) of Article 20(1); (b) benchmarks based on the contribution of input data if their cessation or wind-down would significantly disrupt the functioning of financial markets in the Union; and (c) third-country benchmarks if their cessation or wind-down would significantly disrupt the functioning of financial markets in the Union or pose a systemic risk to the financial system in the Union. 2. The Commission may designate one or more replacements for a benchmark provided that any of the following events has occurred: (a) the competent authority for the administrator of that benchmark has issued a public statement, or has published information, in which it is announced that that benchmark no longer reflects the underlying market or economic reality; in the case of a benchmark designated as critical by an implementing act adopted pursuant to point (a) or (c) of Article 20(1), the competent authority shall make such an announcement only where, following the exercise of the powers set out in Article 23, the benchmark still does not reflect the underlying market or economic reality; (b) the administrator of that benchmark, or a person acting on behalf of that administrator, has issued a public statement, or has published information, or such public statement has been made or such information has been published, in which it is announced that that administrator will commence the orderly wind-down of that benchmark or will cease to provide that benchmark or certain tenors or certain currencies for which that benchmark is calculated permanently or indefinitely, provided that, at the time of the issuance of the statement or the publication of the information, there is no successor administrator that will continue to provide that benchmark; (c) the competent authority for the administrator of that benchmark or any entity with insolvency or resolution authority over such administrator has issued a public statement, or has published information, in which it is stated that the administrator will commence the orderly wind-down of that benchmark or will cease to provide that benchmark or certain tenors or certain currencies for which that benchmark is calculated permanently or indefinitely, provided that, at the time of the issuance of the statement or the publication of the information, there is no successor administrator that will continue to provide that benchmark; or (d) the competent authority for the administrator of that benchmark withdraws or suspends the authorisation in accordance with Article 35 or the recognition in accordance with Article 32(8) or requires the cessation of the endorsement in accordance with Article 33(6), provided that, at the time of the withdrawal or suspension or the cessation of endorsement, there is no successor administrator that will continue to provide that benchmark and its administrator will commence the orderly wind-down of that benchmark or will cease to provide that benchmark or certain tenors or certain currencies for which that benchmark is calculated permanently or indefinitely. 3. For the purposes of paragraph 2 of this Article, the replacement for a benchmark shall replace all references to that benchmark in contracts and financial instruments as referred to in Article 23a where those contracts and financial instruments contain: (a) no fallback provision; or (b) no suitable fallback provisions. 4. For the purpose of point (b) of paragraph 3, a fallback provision shall be deemed unsuitable if: (a) it does not provide for a permanent replacement for the benchmark in cessation; or (b) its application requires consent from third parties that has been denied; or (c) it provides for a replacement for a benchmark which no longer reflects or significantly diverges from the underlying market or the economic reality that the benchmark in cessation is intended to measure, and its application could have an adverse impact on financial stability. 5. The replacement for a benchmark agreed as a contractual fallback rate no longer reflects or significantly diverges from the underlying market or the economic reality that the benchmark in cessation is intended to measure, and could have an adverse impact on financial stability, where: (a) that has been established by the relevant national authority on the basis of a horizontal assessment of a specific type of contractual arrangement that has been performed following a motivated request of at least one interested party, and after having consulted the relevant stakeholders; (b) following an assessment in accordance with point (a), one of the parties to the contract or financial instrument has objected to the contractually agreed fallback provision at the latest three months before the cessation of the benchmark; and (c) following an objection pursuant to point (b), the parties to the contract or financial instrument have not agreed on an alternative replacement for the benchmark at the latest one working day before the cessation of that benchmark. 6. For the purposes of point (c) of paragraph 4, the relevant national authority shall, without undue delay, inform the Commission and ESMA of its assessment referred to in point (a) of paragraph 5. Where entities in more than one Member State could be affected by the assessment, the relevant authorities of all those Member States shall conduct the assessment jointly. 7. Member States shall designate a relevant authority that is in the position to conduct the assessment referred to in point (a) of paragraph 5. Member States shall inform the Commission and ESMA of the designation of the relevant authorities by 14 August 2021. 8. The Commission shall adopt implementing acts to designate one or more replacements for a benchmark in accordance with the examination procedure referred to in Article 50(2) where any of the events referred to in paragraph 2 of this Article have occurred. 9. An implementing act as referred to in paragraph 8 shall include the following: (a) the replacement or replacements for a benchmark; (b) the spread adjustment, including the method for determining such spread adjustment, that is to be applied to the replacement for a benchmark in cessation on the date of the replacement for each particular term to account for the effects of the transition or change from the benchmark to be wound down to its replacement; (c) the corresponding essential conforming changes that are associated with and reasonably necessary for the use or application of a replacement for a benchmark; and (d) the date from which the replacement or replacements for a benchmark applies. 10. When adopting an implementing act as referred to in paragraph 8, the Commission shall take into account available recommendations on the replacement for a benchmark, the corresponding conforming changes and the spread adjustment made by the central bank responsible for the currency area in which the relevant benchmark is being wound down, or by the alternative reference rate working group operating under the auspices of the public authorities or the central bank. Before adopting the implementing act, the Commission shall conduct a public consultation and shall take into account the recommendations of other relevant stakeholders, including the competent authority of the benchmark administrator and ESMA. 11. Notwithstanding point (c) of paragraph (5) of this Article, a replacement for a benchmark designated by the Commission in accordance with paragraph 2 of this Article shall not apply where all parties or the required majority of parties to a contract or financial instrument referred to in Article 23a have agreed to apply a different replacement for a benchmark whether before or after the date of application of the implementing act referred to in paragraph 8 of this Article. Article 23c Replacement of a benchmark by national law 1. The national competent authority of a Member State where the majority of contributors is located may designate one or more replacements for a benchmark as referred to in point (b) of Article 20(1), provided that any of the following events has occurred: (a) the competent authority for the administrator of that benchmark has issued a public statement, or has published information, in which it is announced that that benchmark no longer reflects the underlying market or economic reality; the competent authority shall make such an announcement only where, following the exercise of the powers set out in Article 23, the benchmark still does not reflect the underlying market or economic reality; (b) the administrator of that benchmark, or a person acting on behalf of that administrator, has issued a public statement, or has published information, or such public statement has been made or such information has been published, in which it is announced that that administrator will commence the orderly wind-down of that benchmark or will cease to provide that benchmark or certain tenors or certain currencies for which that benchmark is calculated permanently or indefinitely, provided that, at the time of the issuance of the statement or the publication of the information, there is no successor administrator that will continue to provide that benchmark; (c) the competent authority for the administrator of that benchmark or any entity with insolvency or resolution authority over such administrator has issued a public statement, or has published information, in which it is stated that that administrator will commence the orderly wind-down of that benchmark or will cease to provide that benchmark or certain tenors or certain currencies for which that benchmark is calculated permanently or indefinitely, provided that, at the time of the issuance of the statement or the publication of the information, there is no successor administrator that will continue to provide that benchmark; or (d) the competent authority for the administrator of that benchmark withdraws or suspends the authorisation in accordance with Article 35, provided that, at the time of the withdrawal or suspension, there is no successor administrator that will continue to provide that benchmark and its administrator will commence the orderly wind-down of that benchmark or will cease to provide that benchmark or certain tenors or certain currencies for which that benchmark is calculated permanently or indefinitely. 2. Where a Member State designates one or more replacements for a benchmark in accordance with paragraph 1, the competent authority of that Member State shall immediately notify the Commission and ESMA thereof. 3. The replacement for a benchmark shall replace all references to that benchmark in contracts and financial instruments as referred to in Article 23a where both of the following conditions are fulfilled: (a) those contracts or financial instruments reference the benchmark in cessation on the date on which the national law designating the replacement for a benchmark becomes applicable; and (b) those contracts or financial instruments contain no fallback provision or contain a fallback provision that does not provide for a permanent replacement for the benchmark in cessation. 4. A replacement for a benchmark designated by a competent authority in accordance with paragraph 1 of this Article shall not apply where all parties or the required majority of the parties to a contract or financial instrument as referred to in Article 23a have agreed to apply a different replacement for a benchmark whether before or after the date of application of the relevant provision of national law.’;