EU investment funds and corporates rely on dollar-rupee, dollar-won, dollar-Taiwan dollar, and dollar-peso benchmarks to hedge their Asian currency exposure. None of those benchmarks has a compliant EU alternative, and the capital controls that govern their underlying currencies make it impossible to create one. The exemption list is the Commission’s acknowledgment that the Benchmarks Regulation has a reach limit.
The EU Benchmarks Regulation (EU) 2016/1011 was designed to prevent a recurrence of the LIBOR manipulation scandal and similar benchmark failures by requiring that financial benchmarks used in EU contracts and financial instruments meet defined standards of governance, methodology, and oversight. For benchmarks administered outside the EU, the Regulation provides three routes to continued use: equivalence recognition, recognition through national competent authorities, or endorsement. None of those routes works for the administrators of the four spot foreign exchange benchmarks now formally exempted.
The four benchmarks, USDINR (US dollar-Indian rupee, administered by Financial Benchmarks India), USDKRW (US dollar-Korean won, Seoul Money Brokerage), USDTWD (US dollar-Taiwan dollar, Taipei Forex Inc.), and USDPHP (US dollar-Philippine peso, Bankers Association of the Philippines); share a structural characteristic: the currencies they reference are subject to capital controls. India restricts the ability of residents to hold foreign exchange outside India, South Korea limits payments to non-residents, Taiwan does not permit the New Taiwan Dollar to be freely converted outside Taiwan, and the Philippines requires central bank authorisation for international payments above PHP 50,000 (€700). These controls mean that the benchmarks cannot be freely replicated or replaced by an administrator based in or operating freely within the EU.
The Commission conducted a public consultation between May and July 2025 to identify which spot FX benchmarks met the exemption criteria introduced by Regulation (EU) 2025/914. Respondents confirmed that non-deliverable forward and swap contracts referencing the four benchmarks exceeded the EUR 50 billion significance threshold during the second half of 2024, with 70 to 80 per cent of that notional volume representing genuine hedging of Asian currency exposure by EU entities. No EU-based alternative benchmark exists for any of the four currency pairs.
As a result of this Regulation, EU investment funds and companies with Indian, Korean, Taiwanese, and Philippine operations can continue using these benchmarks in their hedging contracts without the Benchmarks Regulation’s full compliance burden applying to the benchmark administrators. The exemption removes what would otherwise have been an effective prohibition on instruments that EU firms have no practical alternative to using.
The exemption is not unconditional or permanent. Designation as an exempt benchmark means the Article 18a criteria (capital controls in the relevant currency, genuine hedging use, and absence of an EU alternative) have been assessed and confirmed. The Commission retains the ability to revisit the designation if those conditions change. Whether any of the four currencies will liberalise their capital controls within the Benchmarks Regulation’s planning horizon is speculative; the controls in each case reflect long-standing domestic monetary policy commitments rather than transitional measures.
The broader implication is modest but clear. The Benchmarks Regulation, for all its post-LIBOR ambition, cannot reach benchmarks that are structurally impossible to replace because they reference currencies that sovereign governments choose to manage rather than freely float. The exemption list is the Commission’s formal acknowledgment of that boundary. For financial institutions, instruments referencing these benchmarks issued after the regulation’s entry into force will not create retroactive compliance problems.
