The Bank of England is consulting on how it will use the new powers it expects to get under the FSMB to ensure effective, resilient and sustainable distribution of wholesale cash. The current wholesale distribution system was designed for a world with far greater cash usage than is now the case, and declining use of cash has put the UK cash infrastructure under pressure. BoE is now consulting on its approach and principles for wholesale cash distribution oversight, high level codes of practice for participating members and fees to fund its supervisory activity. The approach will be separate to the existing Note Circulation Scheme.
Treasury will have power to bring firms within the scope of the statutory regime by making recognition orders. Firms that provide a critical service to the markets who may pose systemic risk will also be subject to a prudential regime – but at the moment neither Treasury nor the BoE think there is any such firm.
In terms of supervision, BoE proposes mainly to use information gathering powers, plus requirements on firms to notify it to changes in strategy, structure or involvement in wholesale cash distribution that could affect the market.
It asks for comment by 10 February 2023.