The Bank of England (BoE) has published its annual report on the supervision of financial market infrastructures (FMIs). The annual report provides an account of how the BoE has exercised its responsibilities in respect of FMI supervision. It is the first such report since the BoE assumed new responsibilities for central counterparties (CCPs) and securities settlement systems in April 2013 and replaces the previous annual report on its supervision of payment systems last issued in March 2013.

The annual report also sets out the BoE’s priorities for FMIs and these include:

  • credit and liquidity risk. The BoE is in the early stages of conducting a thematic review of stress-testing practices across UK CCPs. The BoE has also made it a supervisory priority that the remaining settlement risk is removed for members of the UK’s recognised retail payment systems by requiring the members of BACS and the Faster Payments Service (FPS) to completely prefund their outward payments with cash held at the BoE by the end of 2014;
  • recovery and resolution. Recognised clearing houses (RCHs) that are not CCPs are required to have recovery plans in place by 1 May 2014. The secondary legislation that is required to extend the scope of the resolution regime in the Banking Act 2009 to include CCPs, is expected to be laid before Parliament in Q2 2014;
  • operational risk management insofar as cyber risk is an ongoing priority for all FMIs supervised by the BoE;
  • new payments systems regulator (PSR). Preservation of financial stability will be the driving force behind this new body and as such it will be given priority in UK decision-making in relation to payments. The BoE will work closely with the new PSR in relation to those systems where both have a regulatory role. Co-ordination arrangements will be published in a future memorandum of understanding;
  • developments in international policy. The BoE is taking part in work on monitoring implementation of the International Organization of Securities Commissions’ (IOSCO) April 2012 principles for FMIs (PFMIs) and a number of workstreams are expected to lead to new international guidance for FMIs this year. These relate to recovery and resolution for FMIs and quantitative disclosure for CCPs; and
  • proposed Regulation on improving securities settlement and regulating central securities depositories (CSD Regulation). The BoE expects the proposed CSD Regulation to enter into force in May 2014. It is also intended that draft technical standards will be consulted on in September 2014 so that they can be submitted to the European Commission in early 2015.

View The Bank of England’s supervision of financial market infrastructures — annual report, 17 March 2014