Bank of England to redraw European regulation in line with overhaul

Speaking at a roundtable event held by the BoE on Monday, the executive director for financial market infrastructure (FMI) said the central bank will continue work to develop a UK alternative to the EMIR regime, including refining settlement and margin rules for central clearing counterparties (CCPs).

“For CCPs, we will propose rules to repeal EMIR and replace it with an adaptable and dynamic rulebook that aligns with evolving international standards, particularly on margin transparency,” Sasha Mills said. “We will also engage with firms to further understand how changes in the clearing landscape impact your risk profile. We will also improve our use of data to monitor risks to financial and operational resilience.”

The BoE and US Commodity Futures Trading Commission (CFTC) last month backed a report calling for stronger governance of margin calls by clearing houses.

The regulators were referencing a report titled ‘Transparency and responsiveness of initial margin in centrally cleared markets – review and policy proposals’ published in January by the Basel Committee on Banking Supervision (BCBS), the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO).

The UK central bank will also widen guidance on resilience rules, including oversight of critical third party (CTP) technology providers for financial firms, Mills added.

“This remains a cornerstone of our work, and only grows in importance as geopolitical volatility increases,” Mills said. “As well as working with you through the approaching deadline to meet our required standards, we will be focussing on embedding our oversight regime for CTPs and engaging with you on our operational incident and outsourcing requirements. We also plan to develop more detailed guidance to formalise our expectations on cyber resilience, in line with increased sophistication and risk of cyber events.”

In November, UK regulators published the CTP regime for the UK financial sector, including incident and outsourcing reports, with registration set to be phased in for FMIs from March.

“While this is a significant milestone, it is not the last piece of the puzzle,” Mills said. “FMIs will need to continue to improve operational resilience as risks and technologies evolve. And be mindful of risks that could be posed by the process of introducing significant changes to the technology they use.”