The European Parliament has approved the negotiating mandate for European Commission plans to increase the regulation of benchmarks in the wake of the LIBOR and EURIBOR scandals.

The Parliament cleared the way for trialogue negotiations between itself, the Commission and the European Council on the format and implementation of the regulations.

In September 2013, after discoveries of manipulation in the LIBOR and EURIBOR benchmark rates by market makers, the Commission consulted on how it should approach regulating the markets before deciding on regulation.

Its current proposals aim to address conflicts on interest within rate setters, increased governance, transparency and oversight alongside a code of conduct and additional due diligence.

Negotiations between the three pillars of the European Union will start next month, the Commission said.

“The proposed EU rules aim to improve the functioning and governance of benchmarks that are produced and used in the EU in financial instruments such as bonds, shares, futures or swaps,” it added.

Jonathan Hill, EU commissioner for financial stability, services and capital markets union, said it was the consumers who foot the bill of manipulated and unreliable benchmarks.

“Our proposal will put in place rules for safer benchmarks across the EU,” he said. “I am confident we can now move swiftly to find an agreement on a final text.”

The Index Industry Association (IIA), the lobby group for index providers, said the vote demonstrated an important milestone for effective regulation for benchmarks.

“[The IIA] welcomes the overwhelming vote of support for the regulation,” it said.

“In particular, IIA supports the proportionate and pragmatic approach taken by the European Parliament, which will help to restore confidence in the markets where problems have emerged.”

The work, conducted by the Parliament’s ECON committee, was criticised over one aspect of the bill gone forward.

“[We remain] concerned by the Parliament’s proposal to the introduction of price regulation through legislation,” it said. 

“[We hope] policymakers will be able to make significant progress towards a final agreement through fruitful trialogue negotiations in the months ahead.”

In a survey done last year, academic think-tank EDHEC Risk-Institute showed investors were not satisfied with the increased governance requirements on index and benchmark providers and said transparency was key to manage conflicts of interest.

The Commission consultation began in 2012 before its decision to press ahead with regulation a year later.

The former commissioner for internal markets, Michel Barnier, said the unacceptable behaviour by banks undermined confidence in markets but that increasing sanctions would not be enough to ensure compliance.

In February, the EU Council threw its support behind the proposed new rules, allowing the Commission to see the agenda through parliamentary approval.

The Commission said a final draft of regulatory measures would be seen and implemented as soon as possible.