What do we do?

How we supervise FMIs

The Bank of England’s approach to financial market infrastructure supervision (2024) sets out how we supervise FMIs. 

We also publish annual reports on our regulation of FMIs and these contain information about updates to our supervisory approach.

We use the CPMI-IOSCO Principles for financial market infrastructures as an international benchmark for our standards.

There are different legal regimes for central securities depositories, CCPs, payment systems and systems designated under the Settlement Finality Regulations. Some FMIs may have requirements under more than one regime. 

We also have enforcement powers under the different legal regimes applicable to FMIs.

Supervisory stress testing of central counterparties (CCPs)

In June 2021, the Bank published a Discussion Paper setting out its proposed framework for Supervisory Stress Testing of CCPs. In October 2022, the Bank published the results report for its first public CCP supervisory stress test exercise, the 2021-22 CCP SST. In November 2023, the Bank published the results report for its second CCP Supervisory Stress Test exercise, the 2023 CCP SST. In November 2024, the Bank published the results report for its third CCP Supervisory Stress Test exercise, the 2024 CCP SST. Further details on the Bank’s CCP supervisory stress testing are available at Stress testing.

Rulemaking Powers

On 1 January 2024 the Bank was given a number of new powers, matched by an appropriately enhanced transparency and accountability regime, in its role as the UK’s regulator for central counterparties (CCPs) and central securities depositories (CSDs) by the Financial Services and Markets Act 2000 (the Act) as amended by the Financial Services and Markets Act 2023 (FSMA 2023).

In particular, FSMA 2023 introduced a power to enable the Bank to replace repealed firm-facing requirements contained in retained EU legislation with its own rules. This complements the existing power to make codes of practice for payment systems. Our approach to the repeal and replace of retained EU legislation into Bank rules will be based, first and foremost, on our commitment to holding FMIs to the highest standards, in accordance with the PFMIs, as well as other relevant international standards.

The Bank is required to carry out Cost Benefit Analysis (CBA) when making new rules for CCPs and CSDs, and has published a Statement of Policy [link] setting out its approach. This explains how the Bank estimates costs and benefits as part of its policymaking process, and the role of regulation of CCPs and CSDs in ensuring the stability of the UK’s financial system. Supported by the CBA Panel, CBA enhances the transparency of our policymaking and our accountability and helps us make better policy.

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 registerOpens in a new window. The Bank will keep the scope of the UK clearing obligation under review.

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

The Settlement Finality RegulationsOpens 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 window. This protection is now in operation.

This list may be updated from time to time.

CHAPS

On 13 November 2017, the Bank of England started to deliver the CHAPS service.

Our Financial Market Infrastructure Directorate supervises this work. We expect the same standards of it as any other systemically important payment scheme.