Fees regime for financial market infrastructure supervision 2021/22

Responses to Consultation on ‘Fees regime for financial market infrastructure supervision 2021/22’, fee rates for the 2021/22 fee year and Statement of Policy
Published on 18 October 2021

(Updating September 2020, July 2019 and June 2018)

Introduction

This Bank of England (the Bank) Policy Statement (PS) provides feedback to responses to the Consultation Paper (CP) ‘Fees regime for financial market infrastructure supervision 2021/22’footnote [1]. The PS also sets out:

  • the final fee rates in relation to the Bank’s 2021/22 funding requirement for its financial market infrastructure (FMI) supervisory activity and the policy activity that supports this, as permitted by the Bank’s fee‑levying powers;
  • the outcome of the 2020/21 actual costs incurred and the impact on FMI fees charged for 2021/22, including our confirmation of the shortfall/surplus in fees for 2020/21.

This PS is relevant to all FMIs that currently pay FMI supervisory fees to the Bank or are expecting to do so within the 2021/22 fee year.footnote [2]

Feedback to responses

The Bank’s public consultation on the fees regime for FMI supervision 2021/22 ran from 29 May until 30 August 2021. The Bank received three responses to the consultation. Having carefully considered these responses, the Bank does not propose to make any changes to the proposals that were set out in the CP. Details regarding the consultation feedback and the Bank’s responses to the feedback can be found in Chapter 2.

Implementation

Invoices are expected to be issued in September for the 2021/22 fee year.

Feedback to responses

The Bank received three responses which commented on the current and the future fee levels of the fee regime for FMI supervision.

Current fee levels

Fees levied this year included an additional component. As the Consultation Paper sets out – a part of the cost was a phase in from last year. Last year we phased in or smoothed the actual costs – meaning that only half the actual increase in costs was applied last year. This meant that costs this year for all firms would rise even before we considered the new financial year. This smoothed percentage can differ to the previous years where population changes occurred during the year.

Costs reflect the total costs incurred in pursuit of supervision – for example they include the direct supervisory teams but also specialist risk expertise and legal expertise. Supervision also increasingly entails working with other overseas colleagues, with associated costs – either in providing information or in receiving and assessing information. The increase last year (that has been smoothed into this year) was driven primarily by a continued focus on and increased resource allocated to operational resilience, a recalibration of the type of resource dedicated to operational resilience work, and the estimated increase in Bank pension costs.footnote [3]

The Bank’s fees for FMIs are based on the costs incurred in relation to each type of FMI as cross subsidisation is not permitted between the different firm types. Fees are then scaled with reference to their importance to the financial system, with reference to the allocation of supervisory resource costs across the different types of FMIs. The Bank keeps under review the level of supervisory resource that is allocated to the population of FMIs which are supervised by the Bank, and the allocation of that between firm types, with a view to ensuring it is appropriate and proportionate.

Future fee levels

The fees set by the Bank have increased as the complexity of the supervisory challenge has increased – for example the challenges for operational resilience have become even more demanding given a complex cyber environment and large scale technological changes. As a result the Bank has increased resources that are allocated to operational resilience and cyber risks. The UK’s exit from the EU and assumption of new policy making responsibility has further increased the scale of the challenge for supervision. The new supervision and policy approach is still embedding post exit from EU and so it is too early to say if we have finalised the necessary architecture to support the new challenges. The Bank publishes an annual report which provides transparency on how the Bank has exercised its responsibilities in respect of supervising financial market infrastructures since the last report and it also gives an overview of the future priorities.

FMI supervisory fees for 2021/22

Taking into consideration the comments received, the ratios for allocating fees between the different categories of FMIs for 2021/22 remain the same as for the 2020/21 fee year and are confirmed in Table 1.

Table 1 Fee ratio across FMI categoriesfootnote [4]

CCPs - the ratio between category one, category two and category three CCPs

1.75 : 1.00 : 0.57

CSDs - the ratio between category one, category two and category three CSDs

1.50 : 1.00 : 0.67

Recognised payment systems and specified service providers - the ratio between category one and category two firms

1.50 : 1.00

The Bank can confirm that the supervisory fees for the 2021/22 fee year will, in line with the estimates consulted on, be as set out in Table 2.

Table 2 – Fees for the 2021/22 fee yearfootnote [5]

CCPs

CSD

Payment systems and service providers

Category 1

£2.42 million

£1.26 million

£0.67 million

Category 2

£1.39 million

£0.45 million

Category 3

Shortfall/surplus for 2020/21

There was no surplus or shortfall in the fee year 2020/21, so no FMI will receive a rebate in the 2021/22 invoice.

  1. Fees regime for financial market infrastructure supervision 2021/22 Consultation Paper - June 2021

  2. The 2021/22 fee year began on 1 March 2021 and will end on 28 February 2022

  3. Fees regime for financial market infrastructure supervision 2020/21 and other related policy changes | Bank of England

  4. The FMI categories are described as follows: Category 1 – most significant systems which have the capacity to cause very significant disruption to the financial system by failing or by the manner in which they carry out their business; Category 2 ‐ significant systems which have the capacity to cause some disruption to the financial system by failing or by the manner in which they carry out their business; and Category 3 – systems which have the capacity to cause at most minor disruption to the financial system by failing or by the manner in which they carry out their business.

  5. These are rounded figures and FMIs within scope of the regime can expect to be billed exact amounts.

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