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Keeping their focus on success

Critical Third Parties serving the UK financial sector must ready themselves for compliance with the newly proposed operational resilience requirements.

By Rob Moulton, Fiona Maclean, and Charlotte Collins

On 7 December 2023, the PRA, FCA, and BoE jointly published a Consultation Paper (PRA CP26/23 and FCA CP23/30) which proposes a set of regulatory requirements and expectations for critical third parties (CTPs) that provide services to authorised persons, relevant service providers, and financial market infrastructure entities (FMIs). The key aim of the proposals is to manage potential risks to the stability of, or confidence in, the UK financial system that may arise due to a failure in, or disruption to, the services that a CTP provides to such entities.

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The proposals would give the Bank of England wide-ranging powers to deal with acute failure scenarios, treating policyholder liabilities as loss-absorbing.

By Victoria Sander and Tim Scott

HM Treasury is proposing a new UK resolution regime for insurers that would appoint the Bank of England as resolution authority with sweeping powers to resolve insurers through transfer or bail-in, and to make resolution plans and assess resolvability in advance. The regime would share many similarities with the Banking Act 2009 (BA09).

The decision clarifies the role of the English courts and the UK executive branch in the recognition of foreign heads of state and the ability of English courts to adjudicate the lawfulness of executive and legislative acts of foreign states.

By Charles Claypoole, Isuru Devendra and Michelle Taylor

The UK Supreme Court (UKSC) recently issued its judgment in “Maduro Board” of the Central Bank of Venezuela v “Guaidó Board” of the Central Bank of Venezuela.[1] The case concerns who controls Venezuela’s gold reserves of approximately US$1.95 billion held by the Bank of England, and proceeds of a gold swap contract of approximately US$120 million held by court-appointed receivers in England: the board of the Central Bank of Venezuela (the BCV) appointed by Nicolás Maduro, who claims to be the President of Venezuela (the Maduro Board); or the BCV board appointed by Juan Guaidó, who claims to be the interim President of Venezuela following his appointment by the National Assembly of Venezuela (the Guaidó Board)?

The decision confirms that the UK government can recognise one person as de jure head of state of a foreign state and implicitly recognise another person as the de facto head of state.

By Charles Claypoole and Isuru Devendra

The English Court of Appeal’s recent decision in The “Maduro Board” of the Central Bank of Venezuela v The “Guaidó Board” of the Central Bank of Venezuela & Ors[i] concerned who controls Venezuela’s gold reserves in England: the ad hoc board of the Central Bank of Venezuela appointed by Mr. Juan Guaidó (the Guaidó Board) or the board of the Central Bank of Venezuela appointed by Mr. Nicolás Maduro (the Maduro Board).

By Andrew Moyle, Stuart Davis, Fiona Maclean, Christian McDermott and Charlotte Collins

The Bank of England (BoE) announced on 19 July 2017 that it is extending direct access to its real-time gross settlement (RTGS) service to non-bank payment service providers (i.e., e-money institutions and payment service providers that do not have regulatory permissions to carry out the “core” banking activity of taking deposits), subject to appropriate safeguards.

For the first time, non-banks will be able to apply for a settlement account with the BoE, providing direct access to the UK’s sterling payment systems that settle in sterling central bank money, including Faster Payments, Bacs, CHAPS, LINK, Visa, and, once live, the new digital cheque imaging system.

This change to the BoE’s settlement account policy is part of a broader strategy to widen access to the UK’s payment systems, to help smooth the path for new entrants such as FinTech payment firms to compete on a more level playing field with incumbent banks. This is an important development for non-banks as, at present, non-bank payment service providers can only “plug in” to these essential BoE payment systems indirectly via settlement agent banks, limiting access and therefore the ability of non-banks to compete with their bank counterparts.

By Paul Davies and Michael Green

On 16 June 2017, the Bank of England (BoE) published an article setting out its response to climate change, explaining that climate change and society’s response to it presents certain financial risks. These risks arise through two main ways:

  • The physical effects of climate change such as droughts, floods and storms.
  • The impact of changes associated with transitioning to a lower carbon economy such as (i) developments in climate policy (ii) new disruptive technologies or (iii) the changing priorities of investors.

The BoE’s approach in mitigating the financial risks from climate change has two elements:

  • Actively engaging with firms that have climate related risks such as segments of the insurance industry. The BoE is “deepening” its work here, focusing on the insurance sector and starting to work in the banking sector.
  • Improving the resilience of the UK financial system by engaging with initiatives to support a smooth market transition to a low carbon economy. This includes taking a proactive interest in the Financial Stability Board’s (FSB) private sector on climate related financial disclosures (TCFD), co-chairing the G20 green finance study group on behalf of the UK and co-ordinating with other insurance regulators in the Sustainable Insurance Forum (SIF). The BoE is consolidating this international work by (i) liaising with other financial regulators and engaging with the private sector on climate related issues and (ii) considering related research and analytical work, such as reviewing frameworks for understanding the impact of climate change on the wider community.