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Responses are requested by 21 September 2023.
Please address any comments or enquiries by email to: FMIFees@bankofengland.co.uk.
Alternatively, please address any comments or enquiries to: FMI Fees, Financial Market Infrastructure Directorate, Bank of England, 20 Moorgate, London, EC2R 6DA.
Overview
This consultation paper (CP) sets out proposals for the Bank of England’s (the Bank’s) supervisory fees for financial market infrastructure (FMI)footnote [1] for 2023/24. The proposals cover:
- the fee rates to meet the Bank’s 2023/24 funding requirement for its FMI supervisory activity and the policy activity that supports this, as permitted by the Bank’s fee-levying powers.
The CP additionally sets out the Bank’s application of special project fees (SPF) for 2023/24. In the 2023/24 fee year, the Bank expects to recover approximately £0.18 million through an SPF for supervisory work associated with a significant activity that is time limited and requires additional supervisory resource. The Bank has informed the relevant FMI(s) of its intention to recover these costs in addition to the annual FMI fee.
This CP is relevant to all FMIs that currently pay FMI supervisory fees to the Bank or are expecting to do so within the 2023/24 fee year. This includes both UK and incoming FMIs.
Summary of proposals
The Bank’s annual FMI supervisory fee includes the costs of FMI supervision staff together with relevant policy support, specialist resources, corporate services and other costs associated with the work of the FMI Directorate.
A number of functions within the scope of the Bank’s fee-levying powers have required further resource in 2023/24 and these are described in the relevant section below.
The total cost for the 2023/24 fee year of the Bank’s FMI supervisory activity and policy activity that supports this, and is within scope of the Bank’s fee-levying powers, is expected to be £13.8 million, representing an increase of 19% on the total fees levied in 2022/23 of £11.6 million, although these numbers are not directly comparable due to changes in the population of supervised firms
The proposals in this CP have been prepared under a number of resource assumptions and there may therefore be variation in the final fee rates for the 2023/24 fee year because the final fee will reflect the actual level of supervisory resource expenditure over the course of the year. Any variances will be addressed at the conclusion of the 2023/24 fee year through either a rebate or a request for additional fees.
Implementation
The proposed implementation date for the proposals contained in this consultation is Q3 of the 2023/24 fee year (ie September–December 2023 inclusive), at which point invoices are expected to be issued for the 2023/24 fee year.
Responses and next steps
This consultation closes on 21 September 2023. The Bank invites feedback on the proposals set out in this CP. Please address any comments or enquiries to FMIFees@bankofengland.co.uk or, alternatively to: FMI Fees, Financial Market Infrastructure Directorate, Bank of England, 20 Moorgate, London, EC2R 6DA.
Proposals
FMI Fees for 2023/24
This section sets out proposals on FMI fee rates to meet the Bank’s 2023/24 funding requirement for its FMI supervisory activity and the policy activity that supports this, as permitted by the Bank’s fee-levying powers. The FMIs that are currently within scope of the annual FMI supervisory fee are UK and incoming CCPs, UK and incoming CSDs and recognised payment systems and specified service providers to recognised payment systems. More information can be found at Financial market infrastructure supervision on the Bank’s website.
UK FMIs
The ratio for allocating fees between the different categories of UK FMIs remains the same as for the 2022/23 fee year and reflects the different challenges and resourcing requirements posed in supervising different types of FMI and their categories. The ratios of fees charged across the categories of FMI is set out in Table A.
Table A: Fee ratio across UK FMI categories (a)
FMI types and categories | Fee ratios by category | |
|---|---|---|
CCPs – the ratio between category one, category two and category three CCPs | 1.75 : 1.00 : 0.57 | |
CSDs – the ratio between category one, category two and category three CSDs | 1.50 : 1.00 : 0.67 | |
Recognised payment systems and specified service providers – the ratio between category one and category two firms | 1.50 : 1.00 | |
Footnotes
- (a) The FMI categories are described as follows: category one – most significant systems which have the capacity to cause very significant disruption to the financial system by failing or by the manner in which they carry out their business; category two – significant systems which have the capacity to cause some disruption to the financial system by failing or by the manner in which they carry out their business; and category three – systems which have the capacity to cause at most minor disruption to the financial system by failing or by the manner in which they carry out their business.
The total UK FMI fees that are expected to be collected in the 2023/24 fee year are £12.8 million. Table B sets out the expected charge for each category of FMI.
The Bank applies a reduction to the fees for payment systems based overseas in respect of which the Bank has deference-based co-operation arrangements with the relevant home authority where this means the Bank will incur lower costs for its own supervisory activity. The amount of any reduction would be decided on a case-by-case basis to reflect the specifics of the situation, and this will be communicated bilaterally to the relevant FMI(s).
Table B: Fees for 2023/24 fee year (a)
Category | CCPs | CSD | Payment systems and service providers |
|---|---|---|---|
Category one | £2.85 million | £1.38 million | £0.74 million |
Category two | £1.63 million | n.a. | £0.49 million |
Category three | n.a. | n.a. | n.a. |
Comparison of proposed 2023/24 fees with 2022/23 fees
The proposed fees set out in Table B represent an increase of 5% for CCPs, 4% for CSDs, and 8% for payment system and service providers relative to the 2022/23 fees. The proposed fees reflect the following developments and initiatives:
- CCPs and CSDs have seen an increase as additional CCP and CSD policy work is expected to be chargeable in 2023/24 as a number of initiatives begin to have a direct impact on supervised firms eg powers under the Smarter Regulatory Framework.
- The payment systems and service providers increase is driven by greater supervisory activity. Payment systems and service providers has a smaller value increase than other FMI types although this represents a greater percentage increase in fees than other FMI types. This reflects:
- a larger programme of supervisory work planned for 2023/24 focused on operational resilience, which forms a greater proportion of the overall supervisory work for payment systems and service providers than other FMI types; this combined with
- the lower level of existing fees for payment systems versus other FMI types, lead to a larger percentage increase for a smaller value increase.
- a larger programme of supervisory work planned for 2023/24 focused on operational resilience, which forms a greater proportion of the overall supervisory work for payment systems and service providers than other FMI types; this combined with
Incoming FMIs
The Bank now supervises both incoming CCPs and incoming CSDs and will levy fees in line with the principles set out in the November 2022 fees regime policy statements for incoming central counterparties and incoming central securities depositories.
Incoming CCPs
The ratio for allocating fees between the different categories of incoming CCPs is unchanged since the November policy statement. The ratios of fees charged and the proposed levies across the categories of CCPs is set out in Table C.
The incoming CCP fees proposed for the 2023/24 year are in line with the estimated fees in the policy statement.
Table C: Incoming CCP fees for 2023/24 fee year
Incoming CCP group | Fee ratio | 2023/24 proposed fee | Policy statement estimate |
|---|---|---|---|
Group A | 4.0 | n.a. | n.a. |
Group B | 1.0 | £306,300 | £300,000 |
Group C | 0.3 | £91,890 | £90,000 |
Group D | Fixed fee | £9,000 | £9,000 |
Incoming CSDs
The proposed fees for Group A CSDs 2023/24 are 12% lower than those set out in the policy statement. This is due to a lower expected resource requirement for the planned supervisory activities this year. These figures (like all the fees) will be subject to review each year. Group B CSDs incur a fixed fee which remains unchanged since the policy consultation.
Table D: Incoming CSD fees for 2023/24 fee year
Incoming CSD group | 2023/24 proposed fee | 2022 policy statement estimate |
|---|---|---|
Group A | £154,800 | £175,000 |
Group B | £6,000 (fixed fee) | £6,000 (fixed fee) |
Special projects fee
In the June 2018 policy statement on the Fees regime for the supervision of financial market infrastructure, the Bank stated that fees charged to FMIs could include work on special projects that fall under the Bank’s supervisory remit for FMIs and are in the scope of the Bank’s fee-levying powers. It also stated that it considers special projects to be one-off or significant activities that may be time limited and require additional supervisory resource.
The hourly costs incurred by the Bank for FMI special projects (including staff salaries and overheads) are the same as the Prudential Regulation Authority’s hourly costs for special projects. There has been no change in the hourly costs for 2023/24.
Table E: SPF hourly rates 2023/24 (£/hour) (a)
Role | Hourly rate |
|---|---|
Administrator | 60 |
Associate | 130 |
Technical specialist | 190 |
Manager | 250 |
Any other persons employed by the Bank (b) | 350 |
Footnotes
- (a) See page 4 of Fees regime for financial market infrastructure supervision 2020/21.
- (b) The ‘any other’ category is predominantly used for senior management.
The SPF will continue to follow a quarterly invoicing process.
As a result of a time-limited and significant project that falls within scope of the fee-levying powers, the Bank intends to levy an SPF for the 2023/24 fee year and has discussed this bilaterally with the FMI(s) involved. It is expected that the Bank will recover approximately £0.18 million through levying this SPF in 2023/24.
Surplus in fees for 2023/24
As set out in the June 2018 policy statement, the Bank will set FMI fees based on the expected business-as-usual supervisory resource expenditure for the upcoming fee year. Where the Bank’s spend is greater or less than anticipated, the Bank will consider adjusting its annual supervisory levy for the following fee year to account for any under or overspends. In the 2022/23 fee year, the Bank’s spend was in line with the fees charged.
For the purposes of this consultation paper, the term FMI refers to UK central counterparties (CCPs), UK central securities depositories (CSDs), recognised payment systems, and specified service providers to recognised payment systems.