On 14 September 2021, the Bank of England (BoE) published its approach to monitoring third country systems designated under the UK’s Settlement Finality Regulations (UK SFR).
In response to the UK’s withdrawal from the EU, the UK amended its legislation to enable third country central counterparties, central securities depositories and payment systems, which are not subject to UK law, to receive settlement finality designation within the UK. The BoE states that any system previously covered by the EU’s Settlement Finality Directive, that submitted an application for permanent designation by 30 June 2021, continues to benefit from the UK’s settlement finality protection under the Temporary Designation Regime, which ends on 31 December 2023.
The BoE explains that once a system, not subject to UK law, has been designated under the UK SFR it will monitor that system so that it continues to meet the requirements for designation. The BoE sets out the requirements including that the system must have adequate arrangements for the effective monitoring and enforcement of compliance with its rules.
The BoE also covers notification requirements where an operator of a system, not subject to UK law, must notify the BoE when it has made changes to its default arrangements, UK membership or rules relating to matters dealt with in the UK SFR.
The BoE also discusses how it intends to use its information gathering powers under Article 10(2) of the UK SFR. This provides that the BoE can ask a system to provide such information as is reasonably required to satisfy itself that the requirements for designation continue to be met and to verify in such manner as it may specify.