UK payment systems fully consistent with PFMI, CSDs show gaps
A joint report by the BIS Committee on Payments and Market Infrastructures (CPMI) and IOSCO assesses the United Kingdom's implementation of the Principles for Financial Market Infrastructures (PFMI). The assessment finds UK payment systems fully consistent, while central securities depositories (CSDs) show areas for improvement.
Mixed results for UK financial market infrastructure
A joint report by the BIS Committee on Payments and Market Infrastructures (CPMI) and IOSCO evaluates the United Kingdom's adherence to the Principles for Financial Market Infrastructures (PFMI).
The assessment, reflecting the status as of September 30, 2023, concludes that the UK's legal, regulatory, and oversight frameworks for payment systems (PSs) are fully complete and consistent with all PFMI Principles.
However, the findings for central securities depositories (CSDs) and securities settlement systems (SSSs) are more nuanced.
While generally consistent, several areas require improvement.
Specifically, CSDs/SSSs providing banking-type ancillary services were found consistent with 15 Principles, broadly consistent with five (Principles 9, 11, 15, 16, and 23), and not consistent with Principle 10. For CSDs/SSSs not offering such services, additional gaps were identified in Principles 4 and 7, where implementation was deemed only partly consistent.
The PFMI, issued in April 2012, sets expectations for the design and operation of key financial market infrastructures to enhance safety, efficiency, limit systemic risk, and foster financial stability across all systemically important FMIs.
BoE outlines future FMI agenda
The UK employs separate regulatory frameworks for payment systems (PSs) and central securities depositories (CSDs).
The Bank of England (BoE) and the Payment Systems Regulator (PSR) oversee PSs, while the BoE solely supervises CSDs/SSSs.
Key measures include the Banking Act 2009 and the BoE's supervisory approach for PSs, alongside the UK Central Securities Depositories Regulation (UK CSDR) for CSDs/SSSs.
The Bank of England welcomed the assessment, noting the confirmed consistency for payment systems and broad consistency for CSDs.
Since the September 2023 cut-off, the BoE has advanced its FMI agenda, including publishing 'Fundamental Rules for FMIs' in 2025, which are rooted in the PFMI.
Moving forward, the BoE will support the UK National Payments Vision for retail payments and integrate the assessment's insights into future CSD rulemaking, utilizing new powers from the Financial Services and Markets Act 2023.
The BoE emphasizes its commitment to financial stability and FMI innovation.
A foundation, not a finish line
The UK's robust oversight of payment systems provides a strong foundation for financial stability, affirming effective regulatory implementation.
However, identified gaps in central securities depositories, particularly concerning banking-type ancillary services, signal areas needing targeted action.
While the Bank of England's forward-looking agenda is positive, these findings underscore the ongoing necessity for adaptive regulation to ensure full PFMI consistency.