The Bank of England’s approach to statutory notice decisions for use of its requirements powers

The Bank of England has launched a consultation on a proposed new statement of policy outlining its approach to the use of its requirements powers, which are utilized to ensure financial stability and achieve statutory objectives. This policy would clarify the procedures followed by the Bank in exercising its requirements power which enables the Bank to compel entities to take or refrain from or change specific actions, either voluntarily (VREQ – voluntary requests) or upon the Bank’s initiative (OIREQ – own initiative requests).
To begin with, the BoE notes that it can exercise its requirements powers over recognized UK central securities depositories, central counterparties, and systemic third-country CCPs. When doing so, the Bank is obliged to notify affected firms over the use of such powers via statutory notices. The proposed statement of policy would now outline the BoE’s approach to the issuance of such statutory notices and the communication of such to affected firms. Naturally, the key objective of the proposed new policy statement is to provide transparency over the Bank’s supervisory processes.
In brief, the Bank proposes that decisions on whether to issue a statutory notice in relation to the BoE’s requirement powers will be made by one of two decision-making committees (DMCs) based on a decision-making framework outlined in the Standard Operating Procedure (SoP). The choice of which DMC will take the decision would depend on the category of the relevant Financial Market Infrastructure (FMI) entity and the anticipated impact of the decision on the entity’s ability to conduct its business effectively and/or the impact on the Bank’s objectives. The more significant the FMI entity and the greater the decision’s impact, the more senior the composition of the DMC would be. In all cases, the DMCs would have to consider the relevant facts, law, and the Bank’s priorities and policies before making a decision.
The Bank further notes that it will issue the following notices in connection with the use of its requirement powers, namely
– a Warning Notice: The Bank must issue this notice when it intends to reject an application by a relevant FMI entity to impose, cancel, or vary a VREQ.
– a Decision Notice: The Bank is required to issue this notice when it has decided to deny an application by a relevant FMI entity to impose, cancel, or vary a VREQ.
– a Supervisory Notice: The Bank must issue this notice when making decisions regarding imposing, varying, or canceling an OIREQ.
Additionally, the BoE may issue a Notice of Discontinuance and a Final Notice at its discretion. The Notice of Discontinuance identifies the proceedings set out in a Warning or Decision Notice that are not being taken or being discontinued, while the Final Notice outlines the terms of the action that the Bank is taking.
The Bank further describes the circumstances leading to any one of these notices, the decision making process of the DMC, and the way the notices are delivered to affected FMIs.
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Comments on the consultation may be submitted to the Bank of England up to March 21, 2024.