Information on the effect of the UK’s withdrawal from the EU on FMIs

Information on the effect of the UK’s withdrawal from the EU on FMIs, and information for non-UK FMIs on applying to become recognised in the UK and receive UK settlement finality protection

When the UK leaves the EU, the recognition of non-UK FMIs will become the responsibility of UK, rather than EU, authorities.

The information on this page contains details for non-UK FMIs on how recognition and designation will work following the UK’s withdrawal from the EU and the steps firms will need to take.

The UK’s withdrawal from the EU also requires other changes to be made to UK legislation. The proposed changes are to ensure there is a functioning legal framework for UK financial regulation when the UK leaves the EU. A consultation on these changes is available here and the published EMIR and CSDR HMT legislation are also available.

The consultation paper sets out the Bank of England’s (“the Bank’s”) proposal to fix deficiencies arising from the UK’s withdrawal from the EU as a competent authority for FMIs. These deficiencies pertain to both FMI-related binding technical standards and the Bank’s rules for FMIs.

Information for non-UK FMIs

Recognition of non-UK CCPs

The Bank anticipates that when the UK leaves the EU, the UK authorities will apply the recognition regime currently in force in the EU. On 20 December 2017, the Bank set out its approach to the recognition of non-UK CCPs that intend to operate in the UK following withdrawal from the EU in a letter sent to non-UK CCPs. This letter outlined the circumstances in which non‑UK CCPs would need to be recognised following the UK’s withdrawal from the EU, and the process the Bank expects to follow. An update was sent to non‑UK CCPs on 28 March 2018 regarding the timeline for seeking recognition to provide services in the UK. On 25 October 2018, letters were sent to non-UK CCPs, which provided further information on how non‑UK CCPs could submit formal applications to the Bank. Legislation to transfer the third country equivalence and recognition functions under EMIR to the relevant UK authorities came into force on 13 November 2018 and the Bank provided an update to non-UK CCPs on a bilateral basis.

The Bank has set out some additional practical guidance for recognition of non-UK CCPs. Please feel free to contact us at FMI-Enquiries@bankofengland.co.uk

Temporary Recognition Regime

On 25 October 2018, letters were sent to non-UK CCPs, which provided further information on the temporary regime under which non-UK CCPs could continue to provide clearing services in the UK before permanent recognition is granted. This forms part of the Government’s contingency planning for a scenario in which the implementation period, which has been agreed in principle as part of the UK’s Withdrawal Agreement with the EU, does not take effect on 29 March 2019.

To enter the Temporary Recognition Regime (“TRR”), eligible non-UK CCPs need to inform the Bank before the UK’s withdrawal from the EU of their intention to provide clearing services in the UK. They can do this either by submitting an application for recognition or providing a notification to the Bank before the UK’s withdrawal from the EU. The Bank provided an update to non-UK CCPs on a bilateral basis after the legislation came into force on 13 November 2018.

The Bank of England has set out some additional practical guidance for recognition of non-UK CCPs. Please feel free to contact us at FMI-Enquiries@bankofengland.co.uk.

Consultation on Non-UK CCP Recognition Application Fees

The Bank published a consultation on 25 October 2018 on a proposed fee regime for non-UK CCPs seeking UK recognition. This consultation is intended to provide clarity on the Bank’s expected application fee for applications for UK recognition both before and after the UK’s withdrawal from the EU (there will be no fee for entry into the TRR). The Bank will consider the feedback received, with a view to any arrangements commencing in Q1 2019 if the Bank decides to levy fees on non-UK CCPs applying to the Bank for recognition.

Recognition of non-UK CSDs

On 22 October 2018, HM Treasury published 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 has 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.

Any enquiries should be directed to CSD-enquiries@bankofengland.co.uk, along with a contact name and details for further discussion.

Applying to receive UK settlement finality protection

On 31 October 2018, HM Treasury published legislation which sets out how overseas CCPs, CSDs and payment systems can benefit from UK settlement finality designation. In parallel, the Bank published on 6 November 2018 a letter asking EEA systems to indicate whether they will formally notify their intention to enter the temporary SFD designation regime, to continue to benefit from UK settlement finality protection in advance of permanent designation being granted. This letter follows a previous letter sent on 24 July 2018.

Any queries from systems or their users regarding this process should be sent to SFD-Enquiries@bankofengland.co.uk.

This page was last updated 15 November 2018
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