Study Material | Test Series
Drishti IAS
call1800-121-6260 / 011-47532596
Drishti The Vision Foundation
(A unit of VDK Eduventures Pvt. Ltd.)
RBI Accepts Recommendations on Financial Benchmark
Apr 25, 2014

The Reserve Bank of India has asked the Fixed Income Money Market and Derivatives Association of India (FIMMDA) and the Foreign Exchange Dealers’ Association of India (FEDAI) to act as administrators of the Indian Rupee interest rate and foreign exchange benchmarks. To overcome the possible conflicts of interest in the benchmark setting process arising out of the current governance structure of the FIMMDA and FEDAI, an independent body, either separately or jointly, may be formed by FIMMDA and FEDAI for administration of the benchmarks.

In the case of benchmarks based on polled submissions, FIMMDA and FEDAI may select the benchmark submitters on the basis of their standing, market share in the benchmark/instrument linked to the benchmark and representative character. It may put in place a code of conduct specifying various provisions, including hierarchy of data inputs for submissions as recommended by an earlier committee. This committee on financial benchmarks was chaired by P. Vijaya Bhaskar, executive director of RBI, and the central bank accepted the recommendations.

Key Points : 

  • The benchmark submitters have to necessarily participate in the polling process and comply with various provisions specified in the code of conduct

  • They have to put in place an effective conflict of interest policy facilitating identification of potential and actual conflicts of interest

  • They also have to establish an effective whistleblowing policy to facilitate early detection of any potential misconduct in benchmark data presentations

  • Benchmark submissions are subject to periodic internal audit and, where appropriate, to external audit.

  • RBI has asked for submissions by way of written communications or through robust contribution devices which leave an audit trail, to eliminate possibilities of error.


RBI says the benchmark submitters selected by the administrator have to necessarily participate in the polling process and comply with the various provisions specified in the code of conduct. The benchmark submitters may put in place an internal board-approved policy on governance of the benchmark submission process. The policy may ensure that clearly accountable personnel at appropriate senior positions, with requisite knowledge and expertise, are responsible for benchmark submissions.



 

 


Helpline Number : 87501 87501
To Subscribe Newsletter and Get Updates.