On 26 April 2022, HM Treasury published a Policy Statement ‘Protecting UK wholesale cash infrastructure’.

In the Policy Statement HM Treasury reports that the government intends to provide the Bank of England (BoE) with the powers to oversee the wholesale cash industry so that it remains resilient and sustainable and can continue to effectively support access to cash into the future. The government is creating an oversight regime which has two core parts:

• Giving the BoE oversight over, and the ability to regulate, the market activities of the wholesale cash industry to ensure the effectiveness,  sustainability, and resilience of the system. Many industry participants are already working closely with, and providing information to, the BoE on these areas. This regime is an extension of the existing practices and codifies this.
• Giving the BoE the ability to prudentially regulate a systemic entity in the market, should one form in the future, to manage risks to financial stability and maintain confidence in the UK financial system.

The powers that the government intends to provide to the BoE are similar to existing regulatory regimes, such as the oversight of financial market infrastructures including systemic payment systems, tailored for the specific requirements of the wholesale cash market.

HM Treasury, after consultation with the BoE and the industry, would designate entities as within scope of either or both parts of the regime. For the market oversight regime, all entities which provide wholesale cash activities or provide financial support in relation to these activities, could be brought under the regime. HM Treasury will also have the power to designate a critical service provider to the industry under the regime, if required. For the prudential regime, this would apply only where an entity was deemed to be systemic, in that their failure or disruption would threaten financial stability, and they are not already subject to sufficient alternative prudential regulation. Given the nature of governance and financial support for wholly owned state entities these would not be in scope of the prudential regime.

The government and the BoE do not currently assess that any current market participants meet the threshold to be designated under the prudential regime. It will consider on a case-by-case basis whether any future changes to the market or new participants entering the market might create such an entity.

The government intends to legislate for this regime when Parliamentary time allows.