HM Treasury has released a policy statement on its plans to protect the UK’s wholesale cash infrastructure. In recent years the use of cash has declined in favor of cashless transactions, but the UK government is aware of the need to continue to support cash transactions, particularly for older people and vulnerable groups. The government has investigated the use and protection of cash payments in the retail sector, including a consultation on protecting access to cash launched in 2021. The results of this consultation are under consideration .
HM Treasury observes that to support access to cash, the wholesale cash system must be sustainable and resilient. The wholesale payment system consists of a selected group of key market players who facilitate the production and distribution of banknotes and coins. HM Treasury is proposing to give the Bank of England powers to oversee the wholesale cash industry to ensure it continues to operate efficiently, which would be split as follows:
- Market surveillance powers, which would allow the BoE to:
(i) setting objectives for designated entities, for example, high level principles (as approved by Her Majesty’s Treasury) and codes of practice for the operations of designated entities;
(ii) require designated entities to provide information enabling the bank to form a picture of the market and to keep abreast of possible risks; and
(iii) directing the industry, for example imposing or prohibiting certain actions and requiring the payment of fees (according to a scale approved by the Treasury and Her Majesty’s Parliament) by designated entities to meet their costs of running the scheme.
HM Treasury would determine designated entities for market surveillance purposes, which could include all those who provide wholesale cash business or financial support to such business and any other providers of essential services.
- Prudential regulatory powers, which would allow the BoE to exercise the same powers as under the market surveillance regime but with the objective of managing financial stability risks. It would also apply a special administrative regime if a designated systemic entity becomes insolvent. Note that similar SARs already apply to banks and large investment firms; this is a new regime for systemically important companies in the cash wholesale sector that do not fall under these regimes. HM Treasury would determine the designated entities, which would only be those deemed systemic and not already subject to sufficient alternative prudential regulation. Current market participants are not considered to meet the threshold to be designated under the prudential regime.
- Enforcement powers, allowing the BoE to impose sanctions and take other actions to ensure compliance with its prudential and market surveillance regimes.