The Bank of England launches consultation on Fundamental Rules for Financial Market Infrastructures and publishes its approach to FMI supervision

The Bank of England (the Bank) is today consulting on proposals to introduce a set of Fundamental Rules for UK Financial Market Infrastructures (FMIs), which are essential to the smooth and safe operation of the UK financial system and broader economy. It has also published an updated approach document to set out how it supervises these critical firms.

The overarching aim of these publications is to increase transparency by clearly setting out the Bank’s expectations of FMIs and how it will act as FMI supervisor. FMIs the Bank supervises are central counterparties (CCPs), central securities depositories (CSDs), recognised payment systems operators (RPSOs) and specified service providers (SSPs). Both documents highlight the evolution of the Bank’s regulatory and supervisory regime across all FMI types. The Fundamental Rules will increase the effectiveness of the Bank’s supervision of these critical parts of the financial system, supporting UK financial stability and the UK economy more broadly.

Sarah Breeden, Deputy Governor for Financial Stability, said:

"The Fundamental Rules are the first use of the Bank's new rulemaking powers for CCPs and CSDs. Building on the strong foundations we already have, we're using this opportunity to be clear on what we expect from the firms we supervise. Together with our updated approach to supervision, it marks the next stage of the Bank designing a nimble, effective and forward-looking regulatory regime, with more to come in the near future." 

Fundamental Rules consultation

The Bank’s consultation on Fundamental Rules is the first use of the Bank’s new power to make legally binding rules for UK CCPs and CSDs. They will also apply to Bank-regulated UK payments systems and specified service providers.

The rules will provide greater clarity on the Bank’s desired outcomes across areas such as governance, financial and operational resilience, and consideration of FMIs’ impacts on the broader financial system. The rules will also reinforce the Bank’s commitment to international standards of FMI regulation.

By setting out the high-level outcomes the Bank is seeking, these proposals support the Bank’s new secondary objective to facilitate innovation in FMI services. They have also been subject to a cost benefit analysis that has been scrutinised by the independent cost benefit analysis panel that provides advice to the Bank and the PRA.

Approach to Supervision

The supervisory approach document sets out how the Bank will supervise FMIs. This additional clarity will help effective supervision by ensuring FMIs have a clear understanding of what the Bank seeks to achieve. The supervisory approach will continue to evolve and the Bank will periodically update its approach to reflect its priorities and any new developments.

Next steps

The Bank’s consultation on Fundamental Rules is open until 19 February 2025, and the Bank intends to engage with stakeholders during this period to gather a range of views on the proposals. The Bank will also engage with stakeholders in respect of the supervisory approach document in Q1 2025.