The Bank’s transitional regimes for non-UK FMIs
Temporary Recognition Regime for non-UK CCPs
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.
Notification of new products within the TRR
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:
- be authorised or permitted to provide these services in the country in which they are established,
- notify the Bank of their intent to launch these services, and
- provide any supporting information regarding these services as the Bank may specify.
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.
Qualifying Central Counterparties
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.
Non-UK CCP run-off regime
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.
Transitional Regime for non-UK CSDs
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.
The Temporary Designation Regime for non-UK Systems
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.
Non-UK Systems Run-off Regime
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.
Central banks receiving settlement finality protection for securities held as collateral security
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.