Bank of England improves supervision
On March 11, the Bank of England published its annual report on the supervision of financial market infrastructures, including payment systems, central counterparties and securities settlement systems. The report focuses on four key developments:
- Significant improvements of U.K. CCP risk management due to the implementation of the European Market Infrastructure Regulation.
- Putting in place recovery plans for all U.K. FMIs designed to ensure the ongoing provision of critical services in case of financial distress.
- New rules for U.K. CCPs in order to comprehensively allocate losses from their investment of participants’ cash collateral, in accordance with new U.K. legal requirements which came into force during 2014. This legislation enables “highly unlikely and potentially catastrophic losses” to be allocated in a way that allows a CCP to continue to provide its critical services and not lead to the CCP’s insolvency.
- Reduced counterparty credit risk in the U.K. securities markets by moving trades to settlement after two rather than three days (T+2 settlement cycle).
