The Bank of England’s fees regime for financial market infrastructure supervision 2023/24

Overview

This Bank of England (the Bank) policy statement (PS) provides feedback to responses to the consultation paper (CP) Fees regime for financial market infrastructure supervision 2023/24. The PS also confirms:

• the fee rates to meet the Bank’s 2023/24 funding requirement for its financial market infrastructure (FMI) supervisory activity and the policy activity that supports this, as permitted by the Bank’s fee-levying powers; and
• 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.

This PS 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,^{footnote [1]} This includes both UK and incoming FMIs.

Feedback to responses

The Bank’s public consultation on the fees regime for FMI supervision 2023/24 ran from 21 July until 21 September 2023. The Bank received three responses to the consultation. Having carefully considered these responses, the Bank does not propose to make any changes to the proposals that were set out in the CP, and are confirmed below in the statement of policy (SoP). Details regarding the consultation feedback and the Bank’s responses to the feedback can be found below.

Implementation

Invoices are expected to be issued in November for the 2023/24 fee year.

Bank response to consultation feedback received

The Bank received three responses to the consultation, and the points raised have been grouped under the following four headings.

Fee-charging principle and methodology

A respondent suggested that the costs of supervising CCPs should, at least in part, be recovered via fees charged to other relevant market participants. The Bank’s fee regime is designed to recover the costs incurred in supervising FMIs from the supervised FMI entities. This is consistent with its fee-charging legal powers over FMIs. The nature of the Bank’s supervisory activity, and hence its costs, vary across the different FMI types, and the categories within them.

Future fees stability/steady-state level

A respondent noted that the Bank’s fees should be normalising after a period of growth. The Bank recognises firms’ desire for consistency and stability of fees. To the extent possible, the Bank prioritises its supervisory work within the established resource envelope but changes in approach can mean a growth in the overall budget.

Special projects fee

A respondent requested more clarity on the use of special project fees (SPFs). As published in our Fees regime for financial market infrastructure supervision 2018/19, the definition of a ‘special project’ and when fees could be charged is:

As a general principle the Bank considers special projects to be one-off or significant activities that may be time limited and require additional supervisory resource. This could apply to a specific FMI or a group of FMIs. An example that triggers a special project fee could potentially be a change within an individual FMI such as a large-scale restructure that requires additional specific supervisory work and analysis. The Bank expects to levy this fee infrequently and will engage with the FMI or FMIs in the relevant circumstances.

Incoming FMI costs

A respondent queried the levying of fees on incoming FMIs. As noted in the Bank’s fees regime for incoming CCPs policy statement, as a global centre for derivatives trading and clearing, the UK plays an important role in keeping markets stable, efficient and open. Incoming CCPs are also important in supporting financial stability, both in the UK and globally. Incoming CCPs which are recognised by the Bank are able to provide clearing services to UK clearing members and trading venues and the Bank considers it is reasonable and proportionate to levy fees in order to recover the costs of its monitoring and supervision of these CCPs.

The principle of charging incoming CCPs to recover the costs of recognition and supervision is in accordance with the Bank’s statutory and regulatory powers. It is also consistent with the Bank’s approach to the recognition and supervision of UK CCPs and other FMIs which are subject to the Bank’s supervision. Further, in the UK, it is standard practice for regulators to recover the costs of regulation through the levying of fees on the entities they regulate. For example, the Financial Conduct Authority is entirely funded through the fees it charges to regulated firms.

It should also be noted that there are many other jurisdictions with fee regimes in place and therefore the Bank does not consider its approach to be out of step with global practice.

Statement of policy

FMI supervisory fee ratios and fees for 2023/24

The ratios for allocating fees between the different categories of FMIs for 2023/24 remain the same as for the 2022/23 fee year and are confirmed in Table A.

The supervisory fees for the 2023/24 fee year will be as set out in Table B.

Surplus in fees for 2022/23

The Bank confirms that FMIs will not receive a rebate on the fees they paid in 2022/23, as the Bank’s spend was in line with the fees.

Special projects fee

The Bank confirms, as per the CP, that the hourly rates for the special projects fee have remained unchanged and are the same as the Prudential Regulation Authority’s costs for special projects and are as set out in Table E.