CPMI-IOSCO Assesses that the UK Has Implemented the PFMI but Recommends Improvements

Why It Matters

The findings expose regulatory shortfalls that could affect the resilience of the UK’s market‑infrastructure, prompting tighter oversight and potential rule changes that impact participants across the financial system.

Key Takeaways

• UK framework meets 15 PFMI principles for most payment systems.
• Principle 10 fails for CSDs offering banking‑type ancillary services.
• Principles 4 and 7 only partly met by non‑banking CSDs.
• BoE will use new rulemaking powers to address identified gaps.

Pulse Analysis

The Principles for Financial Market Infrastructures (PFMI) serve as the global benchmark for the safety and efficiency of payment systems, central securities depositories (CSDs) and securities settlement systems (SSSs). By assessing the United Kingdom’s adherence, CPMI and IOSCO provide a critical health check for a market that underpins billions of pounds in daily transactions. The UK’s comprehensive framework has largely aligned with the PFMI, reinforcing confidence among international investors and counterparties that the nation’s payment and settlement infrastructure meets high‑quality standards.

Nonetheless, the assessment uncovered specific weaknesses. CSDs that extend banking‑type ancillary services fell short on Principle 10, which governs the segregation and protection of client assets, and were only broadly consistent on five other principles. Meanwhile, CSDs without such services showed partial compliance with Principles 4 (risk‑management framework) and 7 (operational risk). These gaps raise concerns about potential liquidity strains and asset‑safeguarding failures, especially in stress scenarios, prompting market participants to scrutinize risk‑mitigation practices and contractual arrangements.

In response, the Bank of England plans to leverage new rule‑making powers granted by the Financial Services and Markets Act 2000, as amended in 2023, to tighten oversight and close the identified gaps. Future regulations are likely to impose stricter capital, liquidity and governance requirements on CSDs, aligning them more closely with PFMI expectations. Such moves will not only bolster systemic resilience but also signal to global markets that the UK remains committed to upholding the highest standards of financial market infrastructure.