UK: Clearing Houses To Be Subject To Formal Cybersecurity Reporting Duties In The UK

Last Updated: 25 August 2017
Article by Marc Dautlich

Clearing houses in the UK will be subject to new formal cybersecurity incident reporting duties under changes likely to be implemented by 9 May next year.

The government is set to update UK legislation to codify reporting requirements for central counterparties (CCPs) as part of a move to bring the cybersecurity regulation of financial market infrastructures into line with equivalent regulations that will be introduced in other sectors under new EU laws.

The government told that the new reporting requirements will be in line with current informal arrangements that apply. It did not detail what those informal arrangements are.

The government's plans to change the law to codify cyber incident reporting for CCPs relate to its separate proposals to implement the EU's Network and Information Security (NIS) Directive.

The Directive sets out measures designed to ensure critical IT systems in central sectors of the economy like energy, health and transport are secure. It will apply to operators of such 'essential services', as defined by each EU member state. Slightly different rules will also apply to 'digital service providers'. EU countries have until 9 May 2018 to implement the Directive into national laws.

Earlier this month, the government clarified that firms operating in banking and financial markets infrastructure will not be classed as operators of essential services and will not therefore be subject to the UK legislation implementing the Directive. This is despite the fact the operators of essential services in the banking and financial markets infrastructure sectors are specifically identified in the Directive as being within the scope of the new requirements.

However in its consultation paper, the government explained that it was able to exempt those firms from the new UK NIS laws under other provisions contained in the NIS Directive.

According to the NIS Directive, if there are already "Union legal acts" that set out sector-specific requirements regarding the security of firms' network and information systems or the notification of cybersecurity incidents then those provisions should apply so long as the requirements "are at least equivalent in effect" to the obligations set out in the Directive.

The government said that "provisions at least equivalent to those specified in the Directive will already exist by the time the Directive comes into force" in the context of cybersecurity obligations and notification duties in the banking and financial market infrastructure sectors. It said that firms in those sectors "must continue to adhere to requirements and standards as set by the Bank of England and/or the Financial Conduct Authority".

The Bank of England has responsibility for the supervision of CCPs and other financial market infrastructures (FMIs), such as major payment systems and central securities depositories.

The regulatory expectations on FMIs regarding their cyber resilience is governed by a set of principles which set out regulatory expectations on them, while the Bank's oversight of the issue is enhanced via a cybersecurity testing framework.

The principles, the PFMIs, "require financial market infrastructure to identify plausible sources of operational risk, and ways to mitigate their impact", and also "have credible business continuity and recovery plans, with the aim of resuming operations within a maximum of two hours following the most disruptive events", Sir John Cunliffe, deputy governor for financial stability at the Bank of England, explained in a speech (17-page / 655KB PDF) earlier this year.

Sir John's speech coincided with the launch of the Bank of England's latest annual report on its supervision of FMIs (36-page / 1.82MB PDF), in which the Bank described as a "supervisory priority" its oversight of the way in which FMIs manage threats to their "operational resilience", including their defences against cyber attacks.

The report provided details of a "specific review of cyber risk management" that the Bank had conducted "across a range of FMIs" last year. The reviews "were intended to ensure FMIs' risk management functions were operating effectively, and were adequately focused on the increasing risk of cyber threats". The reviews led to the Bank identifying "points for remediation" for some firms, it said.

The Bank also said at the time that it was working to develop "an enhanced micro-supervisory approach to operational resilience".

Further detail of the Bank's approach to supervision of FMIs' cyber risk management was detailed more recently in its June 2017 Financial Stability Report (69-page / 1.47MB PDF). The report confirmed that 31 of 34 "core" financial services firms and FMIs had completed so-called CBEST testing, with two more "close to completion".

The CBEST vulnerability testing framework was set up in 2015 as a scheme through which firms could subject their systems and processes to a cyber risk assessment. Participation in the scheme was initially encouraged but not mandated.

According to the June 2017 Financial Stability Report, the testing identified some weaknesses in "core firms' cyber resilience".

"In some cases, controls on the integrity of systems and confidentiality of data needed to be strengthened," the Bank said. "In others, the tests identified the need for further investment in capabilities to detect, mitigate and respond to attacks. And in general, the tests highlighted the importance of firms continuing to invest in their people, processes and technology in order to counter the risks of cyber attack."

According to the report, the shortcomings are being addressed through the implementation of action plans by firms – an exercise which is being overseen by supervisors.

The Bank said that CBEST testing "will become a regular component of supervisory assessment of firms". It said the 34 'core firms' will be expected to "conduct their own regular tests of cyber resilience" and that "they will also be subject to supervisor-led CBEST testing at regular intervals", the frequency of which it said would be "proportionate to firms' importance for financial stability".

According to the Bank, the CBEST framework is also being adopted in other jurisdictions and sectors.

For financial firms, obligations relating to cybersecurity can also be found in the Financial Conduct Authority (FCA) Handbook, albeit they are stipulated in the context of general requirements regarding the effective management of risk and controls, as well as in relation to rules on business continuity and outsourcing. In addition, rules on notification to regulators also impose on firms a duty to report material cyber incidents.

According to the FCA, an incident may be material if it results in significant loss of data, or the availability or control of your IT systems, affects a large number of customers or results in authorised access to, or malicious software present on, firms' information and communication systems.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances,

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions