A European proposal to regulate financial benchmarks that have been tainted by manipulation allegations is running into criticism from the U.S. Treasury Department.

The plan requires that other countries have equivalent oversight of indexes, which could prevent European banks and asset managers from using U.S. benchmarks, according to a counselor to Treasury Secretary Jacob J. Lew. Europe wants national governments to take responsibility for regulating financial and commodity benchmarks—something the U.S. has no plans to do.

The "prescriptive standard" included in the European Commission's proposal "goes well beyond" the scope of new oversight of benchmarks envisioned by a group of global authorities, Randall DeValk, the Treasury counselor, wrote in a Dec. 16 letter to lawmakers. The U.S. "does not plan to adopt direct supervision of benchmarks," DeValk added.

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