09 February 2018

Bank of England: Consultation on a new rule for Central Counterparties relating to incident reporting

The Bank of England receives notifications from CCPs of incidents relating to their information technology systems. This is important in allowing the Bank to discharge its supervisory mandate and in pursuit of its mission to promote monetary and financial stability.

Currently the Bank receives these notifications in accordance with a supervisory expectation.  This consultation seeks feedback on a new rule the Bank is proposing to make relating to incident reporting, which will formalise the requirement for CCPs to notify the Bank of certain incidents having an impact on their information technology systems.

The proposed rule set out in this Consultation Paper would support the UK Government’s approach to the implementation of the EU Network and Information Systems Directive.  It would be made using the Bank’s powers under the Financial Services and Markets Act2000 (FSMA).  As a result, the relevant requirements are those set out in s293 of FSMA.

Incident reporting allows the Bank to receive critical information about disruptions to the continuity of essential financial services, and to share critical information with the National Cyber Security Centre (NCSC;  the United Kingdom’s technical authority on cyber security issues) subject to permission from the impacted organisation.  The NCSC also acts at the single point of contact for incidents at other operators of essential services.  The Bank considers knowledge of incidents to be an important part of developing a shared understanding of risks, and a vital part of reducing the overall threat to the FMI sector and the financial sector as a whole.

CCPs constitute part of the United Kingdom’s critical national infrastructure due to their central role in clearing and settlement.  If CCPs were unable to perform this function, trading on exchanges and in over-the-counter markets would be disrupted. This could have a detrimental effect on market liquidity, market confidence and financial stability. Over the longer term this could have a negative impact on London’s reputation as a financial centre.

Comments should reach the Bank by 3 April 2018.

Consultation paper

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