The Financial Services and Markets Act 2023 (Resolution of Central Counterparties: Deferment of Provisions in Resolution Instruments) Regulations 2023

The new Financial Services and Markets Act 2023 (Resolution of Central Counterparties: Deferment of Provisions in Resolution Instruments) Regulations 2023 were published on legislation.gov.uk, the online platform of the UK government for publicizing legal documents.
The regulations relate to resolution instruments that the Bank of England (BoE) may apply in situations where a central counterparty is failing or likely to fail pursuant to the resolution regime specified in Schedule 11 of the Financial Services and Markets Act 2023. The Bank’s resolution instruments include, for instance, the right to terminate CCP contracts with clearing members (tear-up instrument), the right to cancel variation margin payments to clearing members (variation instrument), or the right to write-down liabilities of a CCP (write-down instrument), to name the most significant ones. In these new regulations now, the UK government specifies provisions for a suspension or waiver of certain provisions of a resolution instrument to ensure sufficient flexibility of the BoE to react to specific CCP resolution circumstances.
In detail, the regulations
– Allow the Bank to suspend the application of provisions within resolution instruments for up to eighteen months. The BoE can thereby extend the suspension multiple times but always within that maximum eighteen-month period. A suspension must be consulted on with the HM Treasury.
– Grant authority to the BoE to entirely waive provisions in such instruments for any individual or a group of individuals covered by the instrument – again, upon consultation with the HM Treasury. If the Bank doesn’t enforce a suspended provision within eighteen months, it is automatically considered waived.
– Mandate that the Bank considers specific factors before making decisions regarding suspension, waiver, or enforcement. These include impacts on relevant persons, public funds, resolution objectives, and the likelihood of successful resolution.
– Oblige the BoE to notify any relevant persons in a timely manner after decisions regarding suspensions or waivers have been made. Also, they require the Bank to furnish the Treasury with copies of such notifications.
– Necessitate the BoE to review suspended provisions at least every three months. If no action is taken following a review, the provisions remain suspended, and no additional notification is required.
– Specify the process to be followed by the Bank for ending a suspension and enforcing provisions in a resolution instrument, including notification requirements and corresponding deadlines.