Information on the effect of the UK’s withdrawal from the EU on FMI supervision

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

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.

Onshoring of EU law including binding technical standards

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 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 for 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: 

We have also published a Joint Bank and PRA Statement of Policy (SoP), which outlines the Bank’s and PRA’s approach to EU Guidelines and Recommendations after the end of the transition period, in light of the UK’s withdrawal from the European Union. This statement sets out the expectation for firms and FMIs to continue to make every effort to comply with EU Guidelines and Recommendations to the extent they remain relevant after the end of the transition period. In order to aid firms and FMIs, the appendices of the statement contains links to republished copies of EU Guidelines and Recommendations as at the end of the transition period. 
 
Additional Bank of England materials relating to changes that are relevant to the Bank’s role as FMI competent authority include:

 

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’s approach to setting the Clearing Obligation

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.

Information for non-UK FMIs

Recognition of non-UK CCPs

The Bank is responsible for recognising non-UK CCPs who wish to provide services in the UK.

The UK has retained the EU framework for recognising non-UK CCPs (known as ‘EMIR 2.2’), and the Bank has responsibility for finalising policy on important areas of the implementation of EMIR 2.2 in the UK, including specifying further the approach to tiering non-UK CCPs. Any non-UK CCPs that are determined to be ‘Tier 2’ may be subject to greater supervisory oversight by the Bank. The Bank is currently considering its policy approach in these areas and will set out further details in due course including any changes to the required recognition application material.

Non-UK CCPs may continue to submit formal recognition applications. We will ensure 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

Non-UK CCP recognition fees

The Bank published a consultation on 25 October 2018 on a proposed fee regime for non-UK CCPs seeking UK recognition.

Following the consultation and having considered the feedback received, the Bank has decided to introduce a recognition fee of £35,000 for non-UK CCPs. For more information, please see the Statement of Policy published by the Bank on 15 April 2019.

Temporary Recognition Regime for non-UK CCPs

The Temporary Recognition Regime (TRR) came into effect at the end of the transition period and will last until 31 December 2023, 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. 

The Bank has published the list of non-UK CCPsOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window 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 2020Opens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window, and in the practical guidanceOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window for recognition of non-UK CCPs.

Please feel free to contact us at FMI-Enquiries@bankofengland.co.uk

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 have entered the TRR but 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.  

Recognition of non-UK CSDs

On 6 December 2018, the UK parliament approved legislationOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window 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.

On 25 September 2020, the UK parliament has further approved legislationOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window, 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, if HMT makes any equivalence decisions in relation to the EEA during the transition period, EEA CSDs will be able to apply to the Bank for recognition before the end of the transition period and, in any event, must submit a formal recognition application within 6 months from the end of the transition period. As equivalence decisions in relation to each EEA state have been made by HMT on 9 Nov 2020, the Bank further published a letter to EEA CSDsOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window to notify them of the actions that they need to take, including the guidanceOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window that sets out the manner in which such a recognition application may be made and the information that must accompany it.

The Equivalence Determinations SIOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window supplements existing legislation that provides for equivalence and recognition decisions after the end of the transition period. The procedure for other non-UK (excluding EEA) CSDs remains unchanged and no equivalence decisions will be made by HMT until after the end of the transition period. As the end of transition period is approaching, the Bank has also published a letter to non-EEA CSDsOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window to remind them the action they need to take to prepare for the end of transition period. 

The Bank has published a list of CSDs that intend to provide CSD services in the UK using transitional provisionsOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window. These provisions are now in effect following the end of the transition period.

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

Non-UK CSD recognition fees

The Bank published a consultation on 15 April 2019 on a proposed fee regime for non-UK CSDs seeking UK recognition.

Following the consultation and having considered the feedback received, the Bank has decided to introduce a recognition fee of £30,000 for each non-UK CSDs recognition. The fee will be payable once the non-UK CSD has been recognised by the Bank. For more information, please see the Statement of Policy published by the Bank on 31 July 2019.

Applying to receive UK settlement finality protection

On 18 February 2019, the UK parliament approved a statutory instrumentOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window that makes amendments to the UK Settlement Finality Regulations (SFRs)Opens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window. 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 instrumentOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window 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. 

On 30 November 2020, the Bank published a letter to systems in the Temporary Designation Regime (TDR)Opens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window reminding them of the actions 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 2018Opens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window and 24 July 2018Opens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window. 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.  

The Bank has published a list of EEA systems whose operators have notified the Bank for such systems to receive settlement finality protectionOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window pursuant to the TDR. The TDR is now in operation.

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

Central banks receiving settlement finality protection for securities held as collateral security

The Settlement Finality RegulationsOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window 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 banksOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new windowOpens in a new window Opens in a new window. This protection is now in operation.

This list may be updated from time to time.

This page was last updated 04 January 2021

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