The Bank of England (BoE) has today published a Consultation Paper and draft Statement of Policy on the Bank’s approach to ‘tiering’ non-UK central counterparties (CCPs) based on the level of systemic risk they could pose to UK financial stability.

Currently non-UK CCPs can provide services in the UK under a temporary recognition regime. In order to continue to provide services in the UK after the temporary regime expires, non-UK or ‘incoming’ CCPs will need to be recognised by the Bank under the on-shored European Market Infrastructure Regulation (EMIR).

A brief summary of the methodology proposed by the BoE is that incoming CCPs will initially be triaged against the following indicators:

i) whether the incoming CCP held at least £10bn of UK clearing member initial margin;

ii) whether the incoming CCP held at least £1bn of UK clearing member default fund contributions; or

iii) if the incoming CCP has an interoperability arrangement in place with a UK CCP.

The Bank will undertake a more detailed assessment of systemic importance for CCPs meeting one or more of these indicators.

Incoming CCPs that are assessed as not systemically important under this triage assessment will be classified as Tier 1 CCPs and will not progress to the next stage of the tiering assessment.


The BoE approach: