The Bank of England will get more powers to set direct requirements for clearing and settlement houses. This is as a part of a wider regulatory revamp because of Brexit. This was proposed by the UK finance ministry. The BoE has very limited powers to set direct regulations for clearing and settlement. These processes that ensure that legal ownership is exchanged for cash and custody in a stock and bond trade.
Rules for the industry inherited from the European Union. Those are the legal responsibility of parliament and government. Hence, the laws would need changing to update them, a cumbersome process. The finance ministry said in a public paper that it proposes more extensive delegation of regulation to the BoE. This is though still working within policies set by the government and high international standards. It would allow the BoE to take enforcement action. To waive or to modify rules and open investigations. Along with financial stability maintenance, which is the overriding aim.
There will be a secondary objective of supporting innovation in a sector. Which is where blockchain is making inroads to cut costs. The EU has said that it will extend temporary permission from June for banks. So that, they can continue using clearers in London. Brussels, worried about not having enough say over foreign clearers. And that too, especially at the times of market crises. They also want chunks of the euro business relocated from London to the bloc. The ministry said that the BoE should consider the potential impact of its decisions on jurisdictions.
The ministry added that the Britain is considering making it explicit that the BoE must ensure that its regulation is based on financial stability risks. They will separately be consulting on the regulatory perimeter for systemically important firms in the payments sector, and that too in the first half of 2022.
