A European Union proposal that would prohibit banks and fund managers in Europe using overseas indexes such as the S&P500 and the Nikkei 225 is being watered down by the European Council.

A draft Council text seen by Financial News, prepared for this week's meeting of European finance ministers, is proposing new conditions designed "to avoid the adverse impacts of a possible abrupt cessation of the use in the EU of benchmarks provided in a [non-EU] country".