Date: 21 July, 2023
The Bank of England issued a consultation paper. Outlining proposed supervisory fees for financial market infrastructure (FMI) activities for the 2023/24 period. This paper presents several key proposals and considerations for FMIs in the upcoming fiscal year.
The consultation paper outlines the proposed fee rates designed to meet the Bank’s funding requirements for FMI supervisory activities and associated policy support. Additionally, the document introduces the concept of special project fees (SPF) for specific time-limited and resource-intensive supervisory work expected in the upcoming year.
These proposals are relevant to all FMIs currently paying or anticipating paying FMI supervisory fees to the Bank within the 2023/24 fee year, encompassing UK-based and incoming FMIs.
The summary of proposals emphasizes the comprehensive nature of the Bank’s annual FMI supervisory fees, covering various costs such as supervision staff, policy support, specialist resources, and corporate services within the FMI Directorate. Notably, the proposed total expenditure for the 2023/24 fiscal year represents a 19% increase from the previous year, attributed to changes in the population of supervised firms.
However, the consultation highlights the possibility of variations in final fee rates due to resource expenditure adjustments throughout the year. The Bank aims to address these variances post-2023/24 through rebates or additional fee requests.
The proposed implementation date for these proposals is Q3 of the 2023/24 fee year, with invoices expected to be issued during this period.
The Bank invites feedback on these proposals until September 21, 2023. Interested parties can provide their comments or inquiries via the provided contact details.
Specific proposals regarding fee rates for different categories of UK FMIs, including CCPs, CSDs, recognized payment systems, and specified service providers, are detailed within the paper. These proposals outline the allocation of fees among various FMI categories based on the challenges and resourcing requirements inherent in supervising different FMIs.
This consultation paper serves as a pivotal guide for FMIs operating within the UK, laying the groundwork for fee structures and expectations for the upcoming fiscal year while ensuring transparency and responsiveness to suit the growing demands of the financial industry infrastructure.
FMI Types and Categories:
The Bank of England’s consultation paper defines various categories for different types of Financial Market Infrastructures (FMIs), categorizing them based on their functions and supervisory requirements. These categories encompass:
- Central Counterparties (CCPs):
- Category One:
- Ratio – 1.75
- Category Two:
- Ratio – 1.00
- Category Three:
- Ratio – 0.57
- Central Securities Depositories (CSDs):
- Category One:
- Ratio – 1.50
- Category Two:
- Ratio – 1.00
- Category Three:
- Ratio – 0.67
- Recognized Payment Systems and Specified Service Providers:
- Category One:
- Ratio – 1.50
- Category Two:
- Ratio – 1.00
These ratios delineate the proportional allocation of fees across different categories within each type of FMI. They reflect the varying complexities and supervisory requirements associated with overseeing distinct types of FMIs, guiding the distribution of fees based on the challenges inherent in supervising each category.
These ratios are instrumental in determining the fee structure for each FMI category, ensuring a balanced and reflective approach to meeting the funding requirements for the Bank’s supervisory activities in the financial market infrastructure.
References:
https://uk.practicallaw.thomsonreuters.com/w-040-1845?transitionType=Default&contextData=(sc.Default)&firstPage=true
https://www.bankofengland.co.uk/paper/2023/cp/boe-fees-regime-for-fmi-supervision-2022-23#:~:text=The%20total%20UK%20FMI%20fees,for%20each%20category%20of%20FMI.