On 2 August 2023, the Bank of England (BoE) published a consultation paper on Ensuring continuity of critical clearing services: The BoE’s approach to discretionary payments by central counterparties (CCPs). The consultation paper sets out the BoE’s proposed approach to its power to temporarily restrict or prohibit discretionary payments to shareholders or employees of recognised UK CCPs in severe circumstances, including if there is a significant deterioration in the financial situation of the CCP and it was therefore at risk of failing.
The power to temporarily restrict or prohibit discretionary payments to shareholders or employees of these CCPs is a new power conferred upon the BoE by the Financial Services and Markets Act 2023, which requires the BoE to publish a statement of its policy with respect to giving directions under this power.
The proposals set out in a draft statement of policy (SoP) in the consultation are the proposed:
- Approach to the statutory conditions for the use of the power, including circumstances for giving a direction to restrict or prohibit discretionary payments.
- Process for giving any direction under this power.
The deadline for feedback to this consultation is 17 November 2023.
The BoE intends to publish the final SoP in Q1 2024 and proposes that the final SoP will enter into effect upon publication.