Fees regime for financial market infrastructure supervision 2022/23

Overview

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 2022/23’.^{footnote [1]} The PS also confirms:

• the final fee rates in relation to the Bank’s 2022/23 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 2021/22 actual costs incurred and the impact on FMI fees charged for 2022/23, including our confirmation of the shortfall/surplus in fees for 2021/22;
• the Bank’s policy on fees for payment systems in respect of which the Bank has a deference arrangement with the home authority; and
• the new hourly rates for the special projects fee.

This PS is relevant to all FMIs that currently pay FMI supervisory fees to the Bank or are expecting to do so within the 2022/23 fee year,^{footnote [2]} with the exception of non-UK CCPs and CSDs for which there will be separate fee regimes.

Feedback to responses

The Bank’s public consultation on the fees regime for FMI supervision 2022/23 ran from 20 September until 3 November 2022. 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, and are confirmed below in the Statement of Policy (SoP). Details regarding the consultation feedback and the Bank’s responses to the feedback can be found below.

Implementation

Invoices are expected to be issued in November for the 2022/23 fee year.

Bank response to consultation feedback received

The Bank received three responses to the consultation, and the points raised have been grouped under the following four headings.

Fee charging principle and methodology

A respondent suggested that the costs of supervising CCPs should, at least in part, be recovered via fees charged to other relevant market participants. The Bank’s fee regime is designed to recover the costs incurred in supervising FMIs from the supervised FMI entities. This is consistent with its fee-charging legal powers over FMIs.

Stability of future fees

The Bank recognises firms’ desire for consistency and stability of fees. To the extent possible, the Bank prioritises its supervisory work within the established resource envelope, but changes in approach can mean a growth in the overall budget. Various specific developments over the last year, as cited in the consultation paper, include structural changes to the Bank’s supervisory workload (eg CCP stress testing and operational resilience), which have a consequential impact on required resourcing.

Allocation of costs for activities related to non-UK CCPs

A respondent queried the allocation of costs associated with the UK’s withdrawal from the EU. As a consequence of the UK’s withdrawal from the EU, the Bank is, in particular, required to establish and implement new co-operation arrangements with EU authorities in respect of relevant UK FMIs operating in the EU, which has impacted costs for UK FMI supervision.

Costs incurred in relation to incoming (non-UK) CCPs and CSDs, including those operating in the UK under temporary recognition, are not included in the calculation of fees for domestic FMIs. The legal regimes are separate and so there is no cross subsidising between domestic and incoming FMIs of the same type. In this context, the Bank has set out its new fee regimes for incoming CCPs and CSDs, which are separate from the fees for their domestic counterparts.^{footnote [3]}

Available categories for recognised payment systems

A respondent suggested that recognised payment systems should be eligible for a category three allocation, whereas the Bank’s current policy only provides for category one or category two allocation for payment systems. The FMI categories relate to the significance of the firms. The Bank continues to be of the view that a payment system that has met the threshold for recognition by HM Treasury will be at least a category two FMI, including where recognition is made on the basis of the payment system’s expected future systemic impact.

Statement of Policy

FMI supervisory fee ratios and fees for 2022/23

The ratios for allocating fees between the different categories of FMIs for 2022/23 remain the same as for the 2021/22 fee year and are confirmed in Table A.

The supervisory fees for the 2021/23 fee year will be as set out in Table B.

Surplus in fees for 2021/22

The Bank confirms that FMIs will receive a rebate on the fees they paid in 2021/22, as set out in Table C. The rebate will be included in the invoices for 2022/23 annual fees.

Special projects fee

The Bank confirms, as per the CP, that the new hourly rates for the special projects fee are as set out in Table D.

Reduction in fees for payment systems based overseas in respect of which the Bank has deference arrangements with the home authority

The Bank confirms that it will apply a firm-specific reduction to the fees set out in Table B for payment systems where such deference arrangements the Bank has with the home authority lead to a material reduction in the Bank’s costs of supervising the firm. The amount of the reduction will be determined on a case-by-case basis, and will be communicated bilaterally to any firms concerned. For the avoidance of doubt, this provision does not give rise to an automatic entitlement to a reduction of fees for overseas-based payment systems and any such reductions will be reviewed on an ongoing basis.