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

Last Updated: 25 August 2017
Article by  

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
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.