This page sets out the legal and regulatory framework that applies in the UK following the UK’s withdrawal from the EU and the end of the transition period.
The Bank of England has assumed new responsibilities related to financial market infrastructure (FMI) supervision. These include the recognition of non-UK FMIs, making technical standards in relation to CCPs and CSDs, and specifying the classes of OTC derivatives that are subject to the clearing obligation.
The UK has made various legislative changes to ensure a functioning legal framework for financial regulation following the UK’s withdrawal from the EU and the end of the transition period.
The Bank has implemented some of these legal changes, including in relation to FMI rules and FMI-related binding technical standards. We have made these amendments to FMI rules and technical standards via ‘EU Exit Instruments’.
The Bank has also set out its use of the temporary transitional power (TTP) and it has published its transitional direction (the legal instrument that gives effect to this power) in December 2020.
In accordance with the EU (Withdrawal Agreement) Act 2020, the Exit Instruments and transitional direction came into effect at the end of the transition period.
The consultation papers and policy statements published before the end of the transition period relating to changes to FMI rules and binding technical standards, and the TTP, are listed below:
There are six main Regulations made by HM Treasury (HMT) which make amendments to the retained EMIR. They are:
There are two main Regulations made by HMT which make amendments to the retained CSDR. They are:
There are two main Regulations made by HMT which make amendments to the UK settlement finality regime. They are:
The Bank of England is responsible for specifying the classes of OTC derivatives that are subject to the clearing obligation under UK law.
The classes of OTC derivatives currently subject to the UK clearing obligation are set out in a public register. The Bank will keep the scope of the UK clearing obligation under review.
The Temporary Recognition Regime (TRR) came into effect at the end of the transition period. The TRR was amended on 22 December 2022 to extend until 31 December 2025, and it remains further extendable by HMT. The TRR allows eligible non-UK CCPs to continue to provide clearing services in the UK before recognition is granted, so long as they continue to be eligible for the TRR. Non-UK CCPs in the TRR must submit an application for recognition within 18 months of the end of the transition period (30 June 2022). See application information.
The Bank has published the list of non-UK CCPs that are taken to be eligible for temporary deemed recognition in the UK by virtue of the TRR. Further CCPs cannot enter the TRR. This list may be subject to change if CCPs no longer meet the eligibility criteria or withdraw from the TRR.
There is more information in the letters sent to non-UK CCPs in October 2018 and November 2020, and in the practical guidance for recognition of non-UK CCPs.
Please feel free to contact us at FMI-Enquiries@bankofengland.co.uk.
The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022 amended Article 17 of the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 to enable CCPs in the Temporary Recognition Regime (‘TRR’) to provide additional services, activities or classes of financial instrument (‘services’) to clearing members or trading venues established in the UK. Any CCP wishing to provide such services must:
If a CCP within the TRR wishes to launch a new product they must notify the Bank using the attached form. Notifications should be made to FMI-Enquiries@bankofengland.co.uk. The Bank will respond within 10 working days of receipt.
The Qualifying Central Counterparties transitional regime has been extended by an additional year. Eligible non-UK CCPs will continue benefiting from a preferential capital treatment for a further year following the date when their QCCP status is due to expire under the existing legislation.
The Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019 establishes a ‘CCP run-off regime’ which provides certain non-UK CCPs time-limited recognition to continue to offer clearing services. This allows UK firms time to close out relevant contracts and business with a non-UK CCP in an orderly manner, in the event that an eligible non-UK CCP did not enter the TRR. The legislation also empowers the Bank to determine a run-off period for non-UK CCPs that entered the TRR but subsequently exit without being granted recognition. The CCP run-off regime came into effect at the end of the transition period.
For non-UK CCPs that were eligible for but did not enter the TRR, the CCP run-off regime provides recognition to provide clearing services in the UK for a period of one year (non-extendable) from the end of the transition period. For eligible non-UK CCPs that have entered the TRR but exit without being granted recognition, the CCP run-off regime provides recognition for a period of up to one year (non-extendable) from the day the CCP exits the TRR.
Firms in the CCP run-off regime are only permitted to carry on the range of services they were permitted to carry on immediately before entering the regime.
On 18 January 2023, the Government introduced an amendment to the Financial Services and Markets Bill to extend the maximum period of run-off for non-UK CCPs. The Bank has published a statement about that proposed extension and the use of its discretion to extend the maximum period of run-off for such CCPs if the amendment comes into force.
On 25 September 2020, the UK parliament further approved legislation, and the Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020 (“Equivalence Determinations SI”) came into force on 30 September 2020. Under this legislation, because HMT made an equivalence decision in relation to the EEA during the transition period, EEA CSDs had to submit a formal recognition application within 6 months from the end of the transition period. The Bank further published a letter to EEA CSDs to notify them of the actions that they need to take.
The Bank has published a list of CSDs that intend to provide CSD services in the UK using transitional provisions. These provisions are now in effect following the end of the transition period.
Any enquiries about the transitional regime for non-UK CSDs should be directed to CSD-Enquiries@bankofengland.co.uk along with a contact name and details for further discussion.
Certain EEA systems receive temporary UK settlement finality protection under the Temporary Designation Regime (TDR) of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019 (as amended) until they receive ‘steady state’ settlement finality designation and so long as they remain eligible for the TDR.
The Bank has published a list of EEA systems whose operators have notified the Bank for such systems to receive settlement finality protection pursuant to the TDR. The TDR is now in operation.
EEA systems in the TDR who applied for ‘steady state’ designation by 30 June 2021 will continue to receive UK settlement finality protection under the TDR, which lasts until 31 December 2023 as long as systems remain eligible.
On 30 November 2020, the Bank published a letter to systems in the TDR reminding them of the actions that they need to take to prepare for the end of the transition period. This letter provides details of how to apply for ‘steady state’ settlement finality designation and follows the Bank’s previous letters sent on 6 November 2018 and 24 July 2018. On 31 July 2019, the Bank announced that it does not intend, at this time, to charge fees to non-UK law FMIs for UK settlement finality designation.
Any queries from systems or their users regarding this process should be sent to SFD-Enquiries@bankofengland.co.uk.
The Financial Markets and Insolvency (Transitional Provision) (EU Exit) (Amendment) Regulations 2021 establishes a ‘designation run-off regime’ which provides certain non-UK law systems that have not applied for ‘steady state’ designation by 30 June 2021 with time-limited designation under the TDR to continue to receive UK settlement finality protection until 30 June 2023.
The Settlement Finality Regulations also set out how the Bank may notify HM Treasury of the non-UK central banks that will receive protection against UK insolvency law challenges in relation to their central bank functions.
At the present time, the central banks of EEA states and the European Central Bank receive this protection. To ensure the continuity of this protection following the UK’s withdrawal from the EU, the Bank has accordingly notified HMT of those central banks. This protection is now in operation.
This list may be updated from time to time.
The Bank is responsible for recognising non-UK CCPs seeking to provide clearing services in the UK.
The UK has retained the EU framework for recognising non-UK CCPs (known as ‘EMIR 2.2’). As part of this, the Bank has published a Statement of Policy on its approach to determining the level of systemic risk that non-UK CCPs seeking recognition could pose to UK financial stability, known as ‘tiering’. CCPs that are determined as systemically important or likely to become systemically important (‘Tier 2’) by the Bank are required to meet specific UK standards under on-shored EMIR and will be subject to direct supervision by the Bank. The Bank has also published a Statement of Policy on its approach to assessing comparable compliance for non-UK CCPs that have been designated as Tier 2 by the Bank.
Jurisdictional equivalence and a Memorandum of Understanding with the relevant home authority are required as part of the recognition process. If a CCP’s jurisdiction has not been granted equivalence, their home authority can engage directly with HMT using the following contact: equivalence@hmtreasury.gov.uk.
A non-UK CCP that is not in the Temporary Recognition Regime (TRR), may submit a formal recognition application to the Bank at any time.
A non-UK CCP that entered the TRR when the UK exited the EU remains in the TRR, provided it applied for recognition by 30 June 2022.
A non-UK CCP that did not apply for recognition by 30 June 2022 automatically entered the run-off regime after that date, meaning that it may continue to offer clearing services in the UK only for a limited amount of time. A non-UK CCP that is in the run-off regime cannot re-enter the TRR, but may apply for permanent recognition at any point after entering the run-off regime. If a CCP that was in the run-off regime (or had previously been in the run-off regime) were to apply for recognition, this would be treated as a new application.
Tiering forms part of the recognition process for non-UK CCPs. However, as set out in the tiering Statement of Policy, applicant CCPs are not required to submit information in relation to tiering at the point of application. Non-UK CCPs applying for recognition should submit recognition applications in accordance with existing technical standards (as set out in the Update letter sent in October 2018). The Bank will write to non-UK CCPs to request tiering information when it is ready to begin its tiering assessments.
We will ensure that non-UK CCPs are kept informed of relevant developments and they should also refer to the following information sources:
Please feel free to contact us at FMI-Enquiries@bankofengland.co.uk
The Bank published a Statement of Policy on 25 November 2022 on its annual fee regime for non-UK CCPs, and revising the existing recognition fee.
On 6 December 2018, the UK parliament approved legislation which sets out how a non-UK CSD can continue to provide services in the UK following the UK’s withdrawal from the EU. In parallel, the Bank published a letter to non-UK CSDs, outlining the circumstances in which non-UK CSDs would need to be recognised and the process that the Bank expects to follow.
The Bank has published guidance that sets out the manner in which a non-UK CSD may make a recognition application. Jurisdictional equivalence and an MoU with the relevant third country regulator are required as part of the recognition process. If a CSD’s jurisdiction has not been granted equivalence, their regulator or finance ministry can engage directly with HMT using the following contact: equivalence@hmtreasury.gov.uk.
Any enquiries should be directed to CSD-enquiries@bankofengland.co.uk, along with a contact name and details for further discussion.
The Bank published a Statement of Policy on 25 November 2022 on its annual fee regime for non-UK CSDs, and revising the existing recognition fee.
On 18 February 2019, the UK parliament approved a statutory instrument that makes amendments to the UK Settlement Finality Regulations (SFRs). These set out how overseas CCPs, CSDs and payment systems can receive settlement finality designation within the UK. The UK parliament has also approved a second statutory instrument making further minor amendments to the UK SFRs. The effect of these is to dis-apply, for systems not governed by UK law, two of the designation requirements, relating to information sharing to third parties and notification requirements by participants in the event of their insolvency.
There are different application processes for different FMI types. All non-UK law private systems can apply using this application form and guidance – Central Banks should contact the Bank directly instead by emailing SFD-Enquiries@bankofengland.co.uk.
There are no statutory timelines for processing settlement finality designation applications, but the Bank will endeavour to process these applications as soon as practicable.
The Bank has published its approach to the monitoring of third country systems designated under the SFR. The Bank does not at this time intend to charge fees for the monitoring of compliance with the SFRs.
On 31 July 2019, the Bank announced that it does not intend, at this time, to charge fees to non-UK law FMIs for UK settlement finality designation.
Any queries from systems or their users regarding this process should be sent to SFD-Enquiries@bankofengland.co.uk.