On 17 January 2022, HM Treasury (HMT) issued a consultation on central counterparties (CCPs) and central securities depositories (CSDs) as part of its Future Regulatory Framework Review (FRFR). Specifically, the consultation follows the commitment in paragraphs 17 and 7.35 of the FRFR consultation that HMT issued in November 2021 where it was stated that in order for the Bank of England (BoE) to take on responsibility for CCPs and CSDs, the government was considering granting the BoE general rule-making powers over CCPs and CSDs along with appropriate enhancements to the BoE’s current framework of objectives and accountability for these entities.

In the consultation HMT sets out proposals for granting the BoE greater rule-making powers over CCPs and CSDs, subject to a new accountability and transparency framework. Specifically, the government intends to build on the model set out by the Financial Services and Markets Act 2000 (FSMA) providing for more extensive delegation of regulation to the BoE, with the BoE overseeing regulatory standards as the expert, independent regulator, working within an overall policy framework set by the government and Parliament. The government intends to grant the BoE a general rule-making power in relation to CCPs and CSDs (modelled on the FCA’s general rule-making power in section 137A of FSMA and the PRA’s general rule-making in section 137G of FSMA) so that it can set appropriate rules for these firms.

The new general rule-making power would also be underpinned by additional powers which replicate arrangements for the PRA and FCA, including:

• Powers for the BoE to take enforcement action in cases of breaches, alongside rights of appeal for the CCP or CSD.
• Powers for the BoE to waive or modify rules.
• Investigatory powers and information gathering powers.

HMT is also considering whether it would be appropriate to expand the BoE’s existing direction powers in sections 296 and/or 296A of FSMA to allow the BoE to direct CCPs and CSDs when it is “desirable” to advance the BoE’s new objectives, subject to the appropriate caveats and safeguards.

The deadline for comments on the consultation is 28 February 2022.

Recognised payment systems and specified service providers to recognised payment systems, which are also financial market infrastructures under the BoE’s remit, are excluded from the scope of the consultation as the BoE already has sufficient powers under the Banking Act 2009 to regulate these firms. The government will separately be consulting on the regulatory perimeter for systemically important payment actors in the first half of 2022.