Financial market infrastructures (FMIs) play a key role in the smooth functioning of the economy and can enhance the stability of markets and promote wider financial stability.
There are three main types of infrastructure overseen by the Bank:
- Recognised payment systems
- Securities settlement systems
- Central counterparties (CCP)
See the full list of supervised systems under related links.
Market functioning relies on ensuring the continuity of the services that these infrastructures provide. Payment systems enable the lending and repayment of money, allow businesses to receive payments for goods and services, and facilitate the payment of salaries and benefits to the general public. In 2012, the value passing through UK payment systems overseen by the Bank was around £184 trillion, over 127 times UK annual gross domestic product. Securities settlement systems enable the purchase and sale of equities and bonds. Central counterparties offer their guarantee to their participants that transactions in a range of financial and commodity markets will be honoured even if the original counterparty defaults.
In its supervision of financial market infrastructure the Bank will work closely with the Financial Conduct Authority (FCA) reflecting the FCA’s responsibilities for the trading infrastructure and market conduct. A Memorandum of Understanding has been agreed between the Bank, FCA and Prudential Regulation Authority (PRA) for supervision of markets and market infrastructure. The Bank will also work closely with overseas authorities which have an interest in UK-based systems that support global markets.
Objectives of FMI supervision
Market functioning, and therefore financial stability, can be dependent on the continuity and orderly operation of services provided by FMIs. Monitoring, managing and mitigating risk, including systemic risk, is a primary responsibility for the operators of financial market infrastructure.
Supervision of FMIs is therefore closely linked to preserving financial stability. Consistent with that, the Bank will undertake its supervision of FMIs with a view to protecting and enhancing the stability of the financial system. More information is available under key resources.
There are different legal regimes for CCPs, recognised payment systems and securities settlement systems which enable the Bank to carry out its supervision of FMIs. These are set out on the Standards
page. For all FMIs supervised by the Bank, overarching the legal regimes the regulatory context will be framed by the internationally agreed CPSS/IOSCO Principles for Financial Market Infrastructure - see External Links.