The Bank of England is considering implementing a set of “fundamental rules” for securities and derivatives clearing and settlement houses as part of its post-Brexit regulatory overhaul. This follows a new UK law that grants the Bank powers to write rules for these houses, which ensure that trades involving stocks, bonds, or derivatives are safely concluded with ownership and custody exchanged for cash.
Previously, rules for the sector were written in Brussels while Britain was a member of the European Union. However, with the UK’s departure from the EU, the Bank of England is now responsible for creating and implementing these rules.
Sasha Mills, the Bank of England’s executive director for market infrastructure, explained the institution’s approach to the upcoming rulebook at a conference organized by ISDA, a global derivatives industry body. She emphasized the Bank’s commitment to transparency, stating, “In designing our rulebook we want to be as transparent as possible and to set out to the industry the fundamental principles that underpin the rulebook and what we expect of firms.”
Mills further highlighted the importance of the UK’s position as a global financial center and acknowledged the international use of UK clearers in other parts of the world. This consideration will be taken into account when formulating the rules.
In addition to transparency and global relevance, the Bank of England will conduct a thorough cost and benefit analysis of any proposed rules. Mills stated, “I don’t want to presuppose the outcome of that process, but I want to make my position absolutely clear – we at the Bank will not lower standards. Nor are we interested in making changes for change’s sake.”
With the UK’s withdrawal from the EU, it is crucial for the Bank of England to establish a robust regulatory framework for securities and derivatives clearing and settlement houses. By implementing “fundamental rules,” the Bank aims to provide clarity and consistency for firms in the industry and maintain high standards, ensuring the continued success of the UK’s financial sector.
More detail via Reuters here… ( Image via Reuters )