London should hand Libor supervision to EU, says Brussels Brussels is proposing to put the scandal-ridden Libor lending rate under the watch of a European supervisor based in Paris as part of an overhaul of regulation of pricing benchmarks for an array of markets from oil to gold. A draft of the European Commission regulation, seen by the Financial Times, seeks to call time on the era of self-regulation for hundreds of benchmarks and moves direct supervision of Libor from London to the European Securities and Markets Authority, based in France. The move to strip London of oversight of Libor is likely to anger George Osborne, the UK chancellor, who has already overseen a wide-ranging review to restore faith in the flagship interest rate benchmark. While London will see the measure as a vote of no-confidence in its measures to strengthen oversight of Libor, Brussels has long sought to bolster the role of pan-EU financial regulators over banking, insurance and markets, with mixed success. The proposal is due to be published this summer but may struggle to be passed into law before the European parliamentary elections next year. Brussels" draft plan requires regulators to authorise and oversee all published benchmarks used as a reference for exchange-traded financial instruments or financial contracts. This covers hundreds of benchmarks ranging from interest rates to most commodities and shipping. The draft proposal from the European Commission comes only weeks after it launched an investigation into the possible manipulation of oil benchmarks. Commodities benchmarks, including Brent crude oil, are unregulated, with publishers such as Platts, a unit of New York-listed McGraw Hill Financial, resisting any oversight. While the vast majority of indices" administrators will be supervised by their home country under the Commission proposal, those running Libor and Euribor and other "critical union benchmarks" are to be under the direct oversight of Esma. "Certain critical inter-bank interest rate benchmarks may have effects in and involve contributors, administrators and users in more than one member state meaning that the supervision of such a benchmark by the competent national authority of the member state where it is located will not be efficient and effective in terms of addressing the risks," said the draft. "For critical union benchmarks, such as Euribor and Libor, it is therefore necessary that Esma is empowered to supervise such benchmarks," it adds. Supervisors of benchmarks would be empowered to seize documents, demand market information, gain access to traders" systems in commodities markets, suspend trading of the financial instrument that references a benchmark, freeze assets and correct mistakes. While the EU governance requirements go further than expected, the Commission plan adheres to global guidelines in sanctioning hybrid models for indices, so survey results can be used where necessary to complement real transactions or bids data. Global regulators are racing to restore faith in interest rate benchmarks following the rate-manipulation scandal. Fears over the vulnerabilities of commodities indices were heightened recently when the Commission launched its antitrust probe into energy price benchmarks. The Brussels approach is deliberately broad, covering all commodity benchmarks, to avoid loopholes and ensure benchmarks with similar methodologies are treated the same way by regulators. But under the proposal, the Commission would be empowered to provide more detailed provisions for commodity and interest rate benchmarks at a later stage, as well as setting rules to ensure the governance requirements are "proportional." Esma would be given the power to force banks to participate in panels for Libor and Euribor or other critical benchmarks on the grounds that the failure of the indices "may have a significant impact on financial stability, market orderliness or investors." Several banks have already quit the Euribor benchmark in spite of warnings that contributions may be mandatory in future.