The Bank of England (the Bank) and the Commodity Futures Trading Commission (CFTC) have today announced a further strengthening of their commitment to close cooperation and mutual understandings on the supervision of cross-border central counterparties (CCPs).
The Bank and the CFTC have a longstanding relationship of cooperation and mutual understanding with respect to the supervision and oversight of cross-border CCPs, and recognise the importance of deference in regulation and supervision where appropriate. The deferential approach is in line with the G20 commitments made in St Petersburg in 2013, and reduces the risk of regulatory duplication while preserving the benefits of cross-border clearing activities.
The Bank and the CFTC are committed to maintaining a robust and effective relationship of cooperation and information sharing. Pursuant to their existing 2020 Memorandum of Understanding (MoU), the authorities share a common understanding of mutual practices in connection with certain U.S. and UK cross-border CCPs within the MoU’s scope. Duly authorised officials have set out arrangements which detail and support the practices of the existing MoU.
The nature of the cooperation exhibited in these practices includes periodic engagements between staff of the Bank and the CFTC to exchange views on relevant supervisory issues, take into consideration each other’s views as appropriate, and provide assistance on specific matters of concern where they arise.
The practices also include the robust and timely sharing of information, including data on the clearing services provided to market participants; notifications of material events, including those related to financial resilience or business continuity of the CCPs, in accordance with the MoU; and regular engagement on areas of supervisory focus.
Following the UK’s withdrawal from the European Union (EU), the Bank has responsibility for recognising and supervising non-UK CCPs (incoming CCPs) intending to provide clearing services to clearing members or trading venues established in the UK, subject to HM Treasury making regulations determining that the home regime is equivalent to the UK’s regime. The Bank will tier incoming CCPs according to the level of systemic risk they pose to the UK financial system. Where the Bank determines that it is able to place reliance on the incoming CCP’s home authority’s regulation and supervision, the CCP will be designated as Tier 1 and the Bank will defer to the home authority, upon issuance of the Bank’s recognition decisions.
In this regard, the CFTC and the Bank reaffirm the primacy of the UK and US home authorities in their respective jurisdictions and recognise the importance of deference, sustained by an appropriate and proportionate framework for information sharing and cooperation. Based upon the MoU and the detailed practices set out thereunder, the Bank has determined that its relationship with the CFTC meets the expectations of the Bank’s Level 1 Informed Reliance Assessment. Consistent with the Bank’s Statement of Policy and following the recognition and tiering decisions, the outcome of this assessment enables the Bank to place reliance on the CFTC’s supervision and oversight of incoming CCPs based in the US.