HM Treasury Publishes Special Resolution Regime Code of Practice for Central Counterparties

HM Treasury has published the Central Counterparties Special Resolution Regime Code of Practice, setting out guidance on the operation of the expanded resolution regime for CCPs established under the Financial Services and Markets Act 2023 (discussed in our client note, A Boost for UK Financial Services). The FSM Act 2023 replicates some, but not all, aspects of the EU's CCP Recovery and Resolution Regulation (which came into effect post-Brexit), granting powers to the Bank of England, as the U.K. resolution authority, to safely resolve a CCP. The expanded U.K. regime came into effect on December 31, 2023 (by virtue of The Financial Services and Markets Act 2023 (Commencement No. 4 and Transitional and Saving Provisions) (Amendment) Regulations 2023), applying to any resolution that commences from that date. The Code applies to the Bank of England as well as HM Treasury, the Prudential Regulation Authority and the Financial Conduct Authority (all of which have roles in the operation of the special resolution regime).

The Code includes guidance on the BoE's use of stabilization powers under the new regime, as well as broader guidance including the general principles of a resolution, the role that HM Treasury and the U.K. regulators should take in a resolution scenario and the use of other powers that may be used in resolutions. The BoE is legally required to have regard to the Code, although it is not bound to follow an approach laid out in the Code if it deems an alternative option would better satisfy the resolution objectives. The Code also sets out how the BoE should support a foreign resolution of a non-U.K. CCP.

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