Bank of England Updates UK’s Money Markets Code

The Bank of England has unveiled an updated UK Money Market Code – the document, first published in 2017, sets out best practice in the unsecured, repo and securities lending markets.

The Code was written by market participants from across all sectors, and is owned by the Bank of England’s Money Market Committee (MMC). Members of the committee are drawn from a wide range of those active in the UK money markets.

As is the case with the FX Global Code, the Bank of England committed to a three-year review of the Money Markets Code, the key findings of which have been incorporated into a 2021 update to the Code written by market participants. The updated Code has been recognised as an industry standard by the FCA.

While the overarching principles of the Code have not changed, there have been what the Old Lady terms “significant changes” aimed at capturing important shifts in markets, and ensuring the Code continues to be applicable and have relevance into the future.

The most striking change in money markets, according to Andrew Hauser, executive director, Markets, at the Bank of England, has been the increased electronification, hence the updated Code includes more detail on best practice in an automated environment.

The updated Code also recognises and promotes the benefit of diverse and inclusive money market participants’ teams, as well as the response to Covid-19 – namely it emphasises it is acceptable to work from home, provided the same level of robust systems and controls are applied.

There is also additional commentary on environmental, social and governance (ESG) criteria, which, the Bank says, becoming increasingly relevant to financial markets.

Finally, the updated Code stresses the importance of high standards of settlement discipline, in response to concern in the market that the level of non-settled trades has increased.

“The fundamental purpose of the Code is to ensure trust exists in the UK money markets,” says Hauser. “The update to the Code means that it continues to be applicable and have relevance into the future. Most noteworthy of the changes is that the Code now highlights the importance and benefits of diverse and inclusive money market participants’ teams, and recognises how financial markets have quickly and effectively adapted to working outside of the office.

“Given the wide relevance of this voluntary Code, I call on all involved in these markets, whether financial intermediaries, investors or non-financial organisations, to adopt the refreshed Code and to build its provisions into their businesses,” he adds.