Bank of England

This is the first in a series of four articles considering central bank payment systems self-assessments against the PFMIs.

Introduction and the Bank of England Example

In response to the financial crises of 2007-2009, at the behest of G20 governments, the Financial Stability Board and its constituent bodies developed broad global standards to shore up a system that had proven all too fragile – though it must be said that the public, regulated marketplaces did function throughout (except in isolated cases where for a few days their governments closed them for fear of collapsing prices). The same cannot be said of the freezing up of the far larger OTC and banks’ market operations in that period, which was the source of the economic and social damage inflicted.

There are still only 16 authorised CCPs (central counterparty clearing houses) in Europe. Each clearing house in Europe had to reapply for authorisation under EMIR (the European Market Infrastructure Regulation), as far more importance has been placed upon them by way of the global regulatory response to the financial crises.

Approval for the launch of its European exchange has been granted to CME Group by the UK regulator, the Financial Conduct Authority (FCA). This represents another piece in CME’s European infrastructure jigsaw, alongside CME Clearing Europe and CME European Trade Repository. CME Europe will be a Recognised Investment Exchange and will be opening on 27 April 2014. The approval for CME’s European exchange means that it can list its first commodity products on this date. It also plans to launch a full suite of FX futures products on the same date.

Bank of England paper warns that CCPs need clear loss assignment rules to maintain solvency in event of default

Even if ECB financial projections for T2S turn out correct, it is going to take a lot of settlement business to recoup the initial investment and migration costs