BoE release consultation on a new rule for central counterparties
16 February 2018 London
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The Bank of England (BoE) has released a consultation paper asking whether recognised central counterparties (CCPs) should give BoE written notice of an incident having a significant impact on the continuity of services it provides.
The proposed rule would mean that central counterparties 鈥渕ust give such notice as soon as reasonably practicable after it becomes aware of the incident鈥�.
BoE also stated that CCPs must provide information about the incident, either concurrently or as soon as reasonably practicable, as this will enable the BoE to determine the impact of the incident.
This rule is without prejudice to any other power of the BoE to require, or ability of the BoE to request, notifications or information from recognised central counterparties, according to the consultation paper.
BoE describes an 鈥榠ncident鈥� as any event having 鈥渁n actual adverse effect on the security of information technology systems鈥�.
In the consultation, BoE asks respondents if they agree with the approach proposed in the rule and if they have any comments on the Bank鈥檚 drafting of the rule.
The proposed rule of written notice would support the UK government鈥檚 approach to the implementation of the EU Network and Information Systems Directive and would formalise some aspects of the current supervisory expectation, according to BoE.
The EU Network and Information Systems Directive concerns measures for a high common level of security of network and information systems across the industry.
The Directive covers operators of essential services across thirteen sectors including financial market infrastructures (FMIs). Of the FMIs supervised by the BoE, only CCPs are currently in-scope of the directive.
The bank considers knowledge of incidents to be an important part of 鈥渄eveloping a shared
understanding of risks, and a vital part of reducing the overall threat to the financial market infrastructure sector and the financial sector as a whole鈥�.
BoE said: 鈥淐CPs constitute part of the UK鈥檚 critical national infrastructure due to their central role in clearing and settlement. If CCPs were unable to perform this function, trading on exchanges and in over-the-counter markets would be disrupted.鈥�
It added: 鈥淭his could have a detrimental effect on market liquidity, market confidence and financial stability. Over the longer term this could have a negative impact on London鈥檚 reputation as a financial centre.鈥�
The Bank of England has asked that comments on the consultation be given by 3 April 2018. The rule is expected to come into effect by 9 May 2018.
The proposed rule would mean that central counterparties 鈥渕ust give such notice as soon as reasonably practicable after it becomes aware of the incident鈥�.
BoE also stated that CCPs must provide information about the incident, either concurrently or as soon as reasonably practicable, as this will enable the BoE to determine the impact of the incident.
This rule is without prejudice to any other power of the BoE to require, or ability of the BoE to request, notifications or information from recognised central counterparties, according to the consultation paper.
BoE describes an 鈥榠ncident鈥� as any event having 鈥渁n actual adverse effect on the security of information technology systems鈥�.
In the consultation, BoE asks respondents if they agree with the approach proposed in the rule and if they have any comments on the Bank鈥檚 drafting of the rule.
The proposed rule of written notice would support the UK government鈥檚 approach to the implementation of the EU Network and Information Systems Directive and would formalise some aspects of the current supervisory expectation, according to BoE.
The EU Network and Information Systems Directive concerns measures for a high common level of security of network and information systems across the industry.
The Directive covers operators of essential services across thirteen sectors including financial market infrastructures (FMIs). Of the FMIs supervised by the BoE, only CCPs are currently in-scope of the directive.
The bank considers knowledge of incidents to be an important part of 鈥渄eveloping a shared
understanding of risks, and a vital part of reducing the overall threat to the financial market infrastructure sector and the financial sector as a whole鈥�.
BoE said: 鈥淐CPs constitute part of the UK鈥檚 critical national infrastructure due to their central role in clearing and settlement. If CCPs were unable to perform this function, trading on exchanges and in over-the-counter markets would be disrupted.鈥�
It added: 鈥淭his could have a detrimental effect on market liquidity, market confidence and financial stability. Over the longer term this could have a negative impact on London鈥檚 reputation as a financial centre.鈥�
The Bank of England has asked that comments on the consultation be given by 3 April 2018. The rule is expected to come into effect by 9 May 2018.
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