The Bank of England’s approach to rule permissions and waivers

1: Overview

1. This Bank of England (the Bank) statement of policy (SoP) sets out the Bank’s approach to the giving of rule permissions under section 138BA of the Financial Services and Markets Act 2000 (FSMA)^{footnote [9]} (the ‘permissions power’). It applies to recognised UK central securities depositories (CSDs), third-country CSDs, recognised UK central counterparties (CCPs) and systemic overseas CCPs,^{footnote [10]} which are collectively referred to in this SoP as ‘FMIs’. It also applies to HMT-designated Critical Third Parties (CTPs).^{footnote [11]} Where CTPs apply for use of a permission, it is likely that they would wish to submit parallel applications to the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), which share regulatory and oversight responsibility for these firms with the Bank. The Bank would coordinate with the PRA and FCA in such cases.

2. The permissions power was inserted into FSMA by the Financial Services and Markets Act 2023 and allows the Bank, on the application or with the consent of an FMI or CTP who is subject to Bank rules, to give the FMI or CTP a permission that enables them to not apply certain rules, or to apply those rules with a modification specified in the permission (rule permission). The permissions power, alongside the requirements powers^{footnote [12]} and a rule review power, which the Bank will consult on in due course, are a key part of embedding agility and flexibility in the Bank’s regulatory toolkit. This power sits alongside the Bank’s ’general modification and waiver power’ under section 138A of FSMA,^{footnote [13]} which is subject to certain specific statutory criteria for its use by the Bank.

3. The Bank’s power to give rule permissions using the permissions power is not subject to statutory criteria and is instead determined with reference to the general policy approach established by the Bank. In the case of certain specific rules, there are subject-specific statements of policy that set out how the Bank intends to assess applications for rules permissions relating to those specific rules. Where there is no subject-specific statement of policy, the Bank encourages FMIs and CTPs to apply for use of the general modification and waiver power. Should an FMI or CTP wish to apply for the use of the permissions power where there is no subject-specific statement of policy, the Bank expects to apply the same criteria for use of the general modification and waiver power. This SoP explains how the Bank will generally approach determining applications to use the permissions power.

5. The subject-specific SoPs will be drafted in a proportionate manner according to the nature, complexity and significance of the rule permission. Generally, the Bank expects these subject-specific SoPs will include:

i. a description of the purpose of the rule permission, including an explanation of the effect the rule permission has on the Bank’s rules;

ii. the assessment criteria which the Bank will expect to be satisfied, including any specific factors that it will take into account, in deciding whether to give the permission;

iii. where appropriate, details of the types of supporting information applicants should submit to the Bank so that it can assess the rule permission application; and

iv. the expected timelines for determining the outcome of completed permissions applications.

6. Where the Bank has not set out criteria, the Bank encourages FMIs and CTPs wishing to apply for the modification or waiver of a rule to apply under the Bank’s general modification and waiver power in section 138A of FSMA.^{footnote [14]}

7. If an FMI or CTP applies for a rule permission where the Bank has not set out subject-specific criteria, in general, the Bank will consider, and place significant weight upon, statutory criteria that apply to the Bank’s general modification and waiver power, which are whether:

i. Compliance by an FMI or CTP with the unmodified rules would be unduly burdensome or would not achieve the purpose for which the rules were made; and

ii. Giving the permission would not adversely affect the advancement of the Bank’s financial stability objective.

8. The Bank expects applications for a rule permission under section 138BA of FSMA or a rule modification or waiver under section 138A of FSMA to be accompanied by sufficient information and evidence demonstrating how the relevant criteria are met. Where necessary to allow a decision to be made, the Bank will request additional detail or information not provided in the application or will ask for clarification of information that is not clear.

9. The Bank’s use of the permissions power is subject to general public law requirements. Where the Bank refuses to give a permission, makes a permission subject to conditions or revokes or varies a permission, a person may refer the matter to the Upper Tribunal.

2: Initial application for permission

10. Where an FMI or CTP is considering an application for a section 138BA rule permission where the Bank has set out assessment criteria for a subject-specific permission in an SoP, it is encouraged to speak to their usual supervisory contact in the first instance before typically completing the relevant sections of and submitting the Permissions FMI and CTP Application Form (Appendix). Where an FMI or CTP is considering an application for a section 138BA rule permission where the Bank has not set out assessment criteria for a specific permission, it is also encouraged to speak to its usual supervisory contact in the first instance before applying for a rule modification or waiver under section 138A of FSMA using the general modification and waiver FMI and CTP application form.

11. If an FMI or CTP wishes to apply under section 138BA of FSMA where the Bank has not set out permission specific assessment criteria in an SoP, it is encouraged to complete the relevant sections of and submit the Permissions FMI and CTP Application Form (Appendix).

12. FMIs or CTPs must notify the Bank immediately on becoming aware of any matter which could affect the continuing relevance or appropriateness of the application, the permission or any condition to which the permission is subject.

13. FMIs or CTPs are typically required to provide details of a precedent permissions notice (meaning any existing related permission decision) when applying for a new rule permission.

14. Where applicable, send your completed application form, together with any supporting documentation required, to FMIInformation@bankofengland.co.uk.

Application timelines

15. We aim to assess completed applications in a timely manner, and within the timelines established in subject-specific Statements of Policy where relevant, or as noted below for rules without subject-specific Statements of Policy. The Bank will confirm receipt of the completed application of the FMI or CTP.

16. In general, the Bank expects to determine the outcome of a completed application within 80 business days from the receipt of the application, or within 120 days for more complex applications, unless there are exceptional circumstances where determination could take longer. During this time the Bank will assess the completeness of the application and evaluate the information provided.

17. Where the Bank has considered an application to be complete, this will not prevent the Bank from requesting additional information necessary for carrying out its assessment. The request will specify the additional information required and the reasons for the request.

18. Should the Bank need to request further information within these deadlines the Bank will specify the additional information requested and the reasons for the request. The day-count will pause until the requested information has been received, and an extra 10 business days will be added to the deadline. Any subsequent requests for information will not affect the deadline. Persistent failure to provide the requested information may result in rejection of the application.

3: Decision on the application

19. When the Bank has reached a decision on an application, it will communicate this in writing to the FMI or CTP.

20. Where the Bank approves an arrangement subject to certain conditions, or rejects an application for permission, it will state the reasons on which the decision is based.

21. In some cases, the approval of a rule permission may mean the Bank needs to impose or vary a requirement that has been imposed on an FMI under section 55L of FSMA as modified and applied by paragraph 9B(1) of Scheduled 17A of FSMA, known as the ‘requirements power’.^{footnote [15]} This power allows the Bank to require an FMI to take action, or refrain from taking certain actions.

4: Varying or revoking a permission

22. If the Bank decides to amend the conditions of a permission or to revoke a permission, it will notify the FMI or CTP of its decision and provide the reasons for it.

23. Where an FMI or CTP is aware of a change in circumstance whereby it may no longer fulfil the conditions under which the permission for the arrangement was given, it should inform the Bank of this change in circumstance.

5: Publishing permissions

24. As noted in HMT’s permissions statutory instrument, the Bank is required to publish details of permissions we approve, unless we consider it inappropriate or unnecessary to do so.

25. The majority of permissions are published in full. The Bank may consider publishing certain permissions in abridged form at the request of the affected FMI or CTP.

6: Evaluating the Bank’s performance in relation to permissions and waivers

26. The Bank will collect and publish information on its performance in relation to timelines for assessing completed rule permission applications. This will include:

i. For general and subject-specific permissions, where the Bank has set timelines for assessing completed rule permission applications, the percentage of applications for which the outcome is determined within the specified timelines, and the average number of business days.

ii. For modification and waiver requests, the average number of business days taken to determine the outcome for requests.

The Bank will collate and publish this information on its website.

Appendix: Permissions FMI and CTP Application Form