The Bank of England’s supervision of financial market infrastructures – Annual Report 2023

The Bank of England (BoE) has published its annual report on the supervision of financial market infrastructures (FMIs). The report covers the period from December 15, 2022 through December 16, 2023 and primarily describes the Bank’s supervisory focus and corresponding activities in the following three key areas:
(1) The enhancement of the financial resilience of FMIs, particularly central counterparties (CCPs);
(2) The improvement of operational resilience in FMIs; and
(3) The facilitation of innovation in payments, settlement and clearing.
Related activities included, for instance, the performance of various supervisory reviews to assess CCP’s models and risk management practices, the implementation of a final CCP resolution regime bringing the UK regime in line with international standards, or the finalization of a policy statement as regards outsourcing and third-party risk management among FMIs. In same context, the BoE also worked on a new regime for overseeing third parties deemed to be critical for the UK financial market.
Other areas of activities included international engagements to develop a harmonized approach for margin requirements in centrally cleared derivative transactions, enhancements to the stress tests of CCPs based upon tightened economic and market conditions, and the launch of a first discussion paper on a „regulatory regime for systemic payment systems using stablecoins and related service providers“.
—
Additionally, the BoE outlines its upcoming supervisory focus which will primarily concentrate on
– carrying forward its work on building financial and operational resilience of CCPs and FMIs, for example, by applying the „Senior Managers and Certification Regime (SM&CR)“ to CCPs and central securities depositories or developing a new, stringent policy on the own funds regime of CCPs;
– enhancing its own capabilities to deal with troubled CCPs, e.g. by expanding its toolkit on measures it can apply in cases of a CCP experiencing financial difficulties (restrictions on payments to stakeholders); and
– further facilitating technological innovation while ensuring safety and soundness to the market (e.g. by working with the FCA on opening the new Digital Securities Sandbox for applicants).
—
For more information, please refer to the above linked report.