On 26 May 2023, HM Treasury (HMT) published a policy paper outlining amendments to the Financial Services and Markets Bill (FSM Bill), concerning overseas central counterparties (CCPs).
In January 2023, HMT introduced an amendment to the FSM Bill which, if enacted, would give the Bank of England (the Bank) the power to extend the maximum run-off period for CCPs from one year to three years and six months. The purpose of this amendment was to allow the Bank to grant CCPs in the run-off regime further time to apply for recognition if they wished to do so, while ensuring that the relevant CCPs can continue to offer services to UK firms during that period. This amendment was agreed to at the Committee stage of the Bill in the House of Lords on 25 January 2023.
To ensure that the extension to the run-off period functions as intended, HMT has introduced two further technical amendments to the FSM Bill:
- The first amendment would ensure that the power for the Bank to extend the maximum run-off period comes into force on Royal Assent.
- The second amendments would, in the event of a gap between a CCP’s exit from the run-off regime and Royal Assent, provide for the Bank to be able to determine that a CCP’s run-off period is to be treated as not having expired, from the making of the determination onwards. Therefore, if a non-UK CCP leaves the run-off regime before the Bank’s power to extend the maximum run-off period comes into force the Bank will be able to exercise its power to vary the run-off period up to the maximum period of three years and six months from when the CCP first entered into it. This power would also come into force on Royal Assent of the Bill.
These two further amendments therefore seek to facilitate the continuity of services to UK firms under the run-off regime by providing contingencies should Royal Assent of the Bill be secured after 30 June 2023 and by ensuring this provision and the January 2023 amendments come into force immediately upon Royal Assent.
On the same date, the FCA, PRA and the Bank (together the regulators) published a joint statement on the government’s proposed amendments to the CCP run-off regime. The statement provides that the regulators welcome HMT’s statement and the government’s proposed amendments to the FSM Bill relating to the CCP run-off regime. The regulators recognise and fully support the intention to facilitate continuity of these clearing services to UK firms consistent with the original amendments tabled for these purposes in January 2023. The regulators will continue to work together towards this aim, having regard to their respective duties. In the event of a gap between 1 July and Royal Assent, the regulators will take a proportionate and risk-based approach when giving consideration to the use of their supervisory powers in relation to firms that may be impacted pending Royal Assent.
Also on the same date, the House of Lords published amendments to the FSM Bill, including those relating to overseas CCPs.