The UK’s Financial Conduct Authority (FCA) has outlined its supervisory strategy for benchmark administrators in a portfolio letter aimed at clarifying its expectations and highlighting areas of regulatory risk.

The letter, originally issued in September 2022, remains relevant as a reference point for ongoing compliance and governance obligations. It reflects insights drawn from recent supervisory activity and encourages benchmark administrators to reflect on how their benchmarks impact firms subject to the Consumer Duty.

This article summarises the key expectations benchmark administrators should continue to monitor as part of their compliance framework.

FCA expectations and associated risks

1. Disclosure

Benchmark administrators must ensure transparent, accessible, and accurate disclosures of:

  • Methodologies (e.g. for ratings)
  • Benchmark statements
  • Key benchmark elements

Users should be able to understand and verify claims, particularly for ESG benchmarks. Misleading labelling may result in significant compliance failures.

⚠️ Risk: Grouping ESG and non-ESG benchmarks under broad “benchmark families” may obscure key differences — especially given the subjectivity of ESG methodologies.

⚠️ Risk: Credit Sensitive Rates (CSRs) must not be treated as LIBOR replacements without scrutiny. CSRs lack breadth of market representation and may carry illiquidity and price volatility risks. Administrators must notify the FCA in advance of their intention to use or administer CSRs in the UK.

2. Data quality and controls

Benchmark administrators must have robust processes to monitor:

  • Quality of input data (especially from third parties)
  • Consistent implementation of methodologies

Where data quality incidents occur, administrators must report:

  • Severity of the incident
  • Extent of benchmark usage
  • Complaints received
  • Root cause analysis and remedial actions taken

⚠️ Risk: Weak data validation processes can result in miscalculations, undermining benchmark reliability. Reliance on unregulated or overseas third parties increases risk.

Where third country benchmark administrators are relied upon, UK firms must assess the reliability of data inputs and whether oversight meets UK regulatory expectations.

⚠️ Risk: Cryptoasset benchmarks are particularly vulnerable to unreliability due to fragmented and opaque markets. Firms should engage with the FCA early if considering administration of these benchmarks.

3. Operational resilience

In line with Policy Statement PS21/3, benchmark administrators must remain resilient to disruption — including cyber incidents.

Responsibilities include:

  • Oversight of intra-group and third-party service providers
  • Ability to terminate underperforming outsourcing agreements and restore services in-house

⚠️ Risk: Failure to notify the FCA under Principle 11 of resilience events may result in regulatory scrutiny.

Common failures include:

  • Late or missed benchmark publication
  • Calculation errors
  • Unreported incidents

4. Governance and oversight

Administrators must maintain strong governance, including:

  • An independent oversight function
  • Change management procedures
  • Conflict of interest frameworks independent of user groups
  • SMCR compliance (since December 2020)
  • Documented records and audit trails

Administrators operating in both the UK and EU must remain alert to regulatory developments from both the FCA and ESMA, particularly in relation to third country benchmark recognition and ESG disclosure standards.

⚠️ Risk: Poor governance can amplify conflicts of interest and weaken oversight.

5. Market competition

Benchmark administrators are expected to support fair competition in the wholesale data market and engage with related regulatory studies and initiatives.

⚠️ Risk: Complex licensing terms and limited switching options may drive excessive benchmark costs relative to service value.

FCA tools for supervisory intervention

Where firms fall short of expectations, the FCA may use a combination of:

    • Proactive engagement, including reviews of ESG benchmark labelling and disclosure standards
    • Thematic reviews, such as:
      • A baseline assessment of operational resilience
      • A multi-firm review of data quality controls
    • Supervisory tools, including mandated skilled person reviews (under Section 166 FSMA)
    • Enforcement action, where necessary

    These tools are already being deployed and remain central to the FCA’s benchmark supervision strategy.

    Ongoing compliance considerations

    Benchmark administrators should maintain a state of readiness in line with the FCA’s expectations. This includes:

    • Periodic reviews of benchmark disclosures and labelling (especially for ESG products)
    • Ongoing assurance over data sourcing and input quality
    • Governance reviews and SMCR alignment
    • Crisis and operational disruption planning, including cyber preparedness
    • Early FCA engagement where new asset classes, such as cryptoassets or CSRs, are being considered

    How C&G can help. Contact us today

    C&G’s consultants have extensive experience supporting benchmark administrators in meeting FCA requirements. We offer tailored support for assurance reviews, data control assessments, SMCR compliance, and operational resilience testing.

    Contact us today to arrange a free one-hour consultation and discuss your compliance needs.

    References

    Portfolio Letter: Our Supervisory Strategy for Benchmark Administrators

    Financial Conduct Authority

    Available at: https://www.fca.org.uk/publication/correspondence/portfolio-letter-benchmarks-sep-2022.pdf
    (Accessed September 2025)