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

When the UK leaves the EU, the Bank of England will assume new responsibilities related to financial market infrastructure (FMI) supervision from the EU authorities. These include the recognition of non-UK FMI and the setting of technical standards in relation to CCPs and CSDs, including the standards that determine which financial products fall within the scope of the clearing obligation. 

The information on this page contains details of these new responsibilities, including for non-UK FMI over how recognition and designation processes will apply following the UK’s withdrawal from the EU and the steps firms will need to take. 

Onshoring of EU law including binding technical standards

The UK’s withdrawal from the EU requires changes to be made to UK legislation, including to ensure there is a functioning legal framework for UK financial regulation when the UK leaves the EU. 

The Bank is responsible for implementing some of these legal changes, including in relation to FMI rules and FMI-related binding technical standards. A consultation on these changes was published in October and is available here. The Bank published its response to the consultation on 28 February 2019. The Bank’s policy statement includes near-final changes to FMI rules and onshored Binding Technical Standards to fix deficiencies arising from the UK’s withdrawal from the EU. The final changes to FMI rules and onshored Binding Technical Standards have now been published. Following the extension to the Article 50 period, a further consultation was published in July 2019, available here.

The relevant Bank of England materials relating to these changes and the Bank’s role as FMI competent authority are:

There are also three main statutory instruments which make the necessary changes to onshore EMIR. They are:

There is one main statutory instrument making the necessary changes to onshore the CSDR is below. This is:

There are two statutory instruments which make the necessary changes to the UK settlement finality regime. They are:

The Bank of England’s approach to setting the Clearing Obligation

Following the UK’s withdrawal from the EU, it will become the Bank of England’s responsibility to specify the classes of OTC derivatives that are subject to the clearing obligation in the UK.

The Bank is not making any immediate changes to the classes of OTC derivatives that are subject to the existing EU clearing obligation in the event that the UK leaves the EU with no implementation period. Details of this are set out in the near-final on-shored Binding Technical Standards (BTS) published on 28 February 2019.

In the event the UK leaves the EU with no implementation period, persons subject to the clearing obligation in the UK will be able to continue to use the same CCPs as today to satisfy that obligation without interruption under - for non-UK CCPs - the Temporary Recognition Regime and the anticipated run-off regime. Each is described in more detail in the relevant sections below.

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 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 for non-UK CCPs

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 exit day.

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 has published an interim list of CCPs that will offer clearing services and activities under the TRR if the UK leaves the EU with no implementation period. This interim list is not necessarily exhaustive and will be updated periodically over the coming months. The final list will be published on the Bank’s website after exit day if the UK leaves the EU with no implementation period.

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.

Non-UK CCP run-off regime

The statutory instrument ‘The Financial Services Contracts (Transitional and Saving Provision) (EU Exit) 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 does not enter the TRR. The legislation also empowers the Bank to determine a run-off period for non-UK CCPs that enter the TRR but exit without being granted recognition.

For non-UK CCPs that are eligible for but do 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) after the UK withdraws from the EU. For eligible non-UK CCPs that enter 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 will only be permitted to carry on the range of services they were permitted to carry on immediately before entering the regime.

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.

Recognition of non-UK CSDs

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 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.

The Bank has published an interim list of CSDs that will provide CSD services in the UK using transitional provisions if the UK leaves the EU with no implementation period. This is an interim list as of the date of publication listed in the document. It is subject to change and will be updated periodically over the coming months. The final list will be published on the Bank’s website after exit day if the UK leaves the EU with no implementation 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 non-UK CSDs. 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 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.

On 6 November 2018, the Bank published a letter asking EEA systems to provide an indication of their intention to enter the temporary Settlement Finality designation regime, to continue to receive UK settlement finality protection in advance of permanent designation being granted. This letter follows a previous letter sent on 24 July 2018. On the 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 an interim list of EEA systems whose operators have notified the Bank for such systems to receive such settlement finality protection. This is an interim list as of the date of publication listed in the document. It is subject to change and will be updated periodically over the coming months. The final list will be published on the Bank’s website after exit day if the UK leaves the EU with no implementation period. Operators of EEA systems who have not done so can continue to notify their intent to enter the temporary settlement finality designation until exit day.

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 statutory instrument referred in the UK settlement finality protection section above also sets 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 the central banks whose names are listed in this document. This protection will take effect on exit day.

This list may be updated from time to time.

This page was last updated 30 July 2019
Was this page useful?
Add your details...