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LCH Ltd Framework Arrangement among Crisis Management Group Members

(Arrangement) 

Background and Rationale for the Arrangement 

LCH.Clearnet ltd (LCH Lid) is a recognised clearing house and recognised 

central counterparty for the purposes of Sections 285 and 290 of the Financial 

Services and Markets Act 2000 (FSMA) and the authorisation requirements 

under Article 17 of the European Markets Infrastructure Regulation (EMIR)1• LCH 

Ltd is subject to regulatory regimes both in and outside of the UK and Europe 

based on its registration status in such other jurisdictions. 

2 The Financial Stability Board's (FSB) Key Attributes of Effective Resolution 

Regimes for Financial Institutions and its annexes (Key Attributes), specifically 

Key Attribute 9 (Institution-specific cross-border cooperation agreements) call for 

the establishment of Crisis Management Groups (CMGs), or other cooperative 

arrangements that achieve an equivalent outcome for financial market 

infrastructures (FMls) that are systemically important in more than one 

jurisdiction. The Key Attributes provide that such CMGs may be based on 

cooperative arrangements maintained under Responsibility E of the 

Responsibilities of central banks, market regulators and other relevant authorities 

for FMls (Responsibility E), contained in CPSS-IOSCO's Principles for Financial 

Market Infrastructures (PFMI). This CMG is a distinct group from LCH Lid's global 

supervisory college, which is governed by a separate agreement. 

Parties and Objectives of the Arrangement 

3 In accordance with the Key Attributes, the Bank of England, as the resolution 

authority for LCH Ltd, and the other CMG Members wish to establish a CMG. 

This document sets out how the CMG Members intend to cooperate, share 

information and coordinate, both during business as usual periods and in times of 

crisis with a view to facilitating the recovery or, as necessary, an orderly 

resolution of LCH Ltd. The objective of orderly resolution is to minimise the 

impact of the failure of LCH Ltd on financial stability and allow for the continuity of 

critical functions while minimising the use of public funds. 

4 The Parties to this Arrangement are the CMG Members and Observers set out in 

Annex 2. The Bank of England may from time to time: 

a. invite additional regulatory authorities to join the CMG and become Parties 

to this Arrangement, as CMG Members or Observers (subject to 

paragraph 10 of this Arrangement); and/or 

1 EU Regulation (EU) No 648/2012 of the European Parliament and or the Council of 4 July 2012 on OTC 

derivatives, central counterparties and trade repositories. 

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b. remove CMG Members or Observers who no longer meet the conditions 

set out in Annex 2. 

5 The Bank of England may invite additional external entities to attend the CMG on 

a standing or ad hoc basis in accordance with Annex 2. 

6 Save as agreed on a case-by-case basis by the Bank of England, the CMG shall 

include only one representative from each of the Parties. 

7 This Arrangement is not legally binding and not legally enforceable. Its provisions 

do not give rise to any legal claim on behalf of any Party or third parties. This 

Arrangement should be interpreted and implemented in a manner that is 

permitted by, and consistent with, the laws and requirements applicable to each 

Party. Nothing in this Arrangement affects the competence or the supervisory, 

resolution or regulatory authority of the Parties under their respective laws. 

8 The Parties may have existing bilateral arrangements (e.g., Memoranda of 

Understanding) or may execute bilateral arrangements in the future. This 

Arrangement is not intended to amend or supersede pre-existing arrangements 

or limit the terms of any future arrangements. 

9 The existence of this Arrangement may be publicly disclosed. A Party may 

publicly disclose an outline of the provisions of this Arrangement or all or portions 

of this Arrangement itself may also be publicly disclosed, to the extent it is 

required to do so by law, or to the extent such public disclosure is in the proper 

exercise of its functions, powers or obligations. If a Party discloses any part of 

this Arrangement, including Annex 2 or the signing pages of other Parties, it will 

give prior notice to the Bank of England, which will inform the other Parties. 

10 This Arrangement will continue indefinitely subject to termination by mutual 

consent of the CMG Members in writing. Any modification to this Arrangement 

(including, without limitation, any changes to the Parties to this Arrangement) will 

be agreed to in writing by all Parties. 

11 For the avoidance of doubt, the confidentiality provisions set forth in Annex 

1 (Information Sharing Framework) will survive any termination of this 

Arrangement. 

General framework for cooperation

12 The Parties acknowledge that the Key Attributes, PFMI, CPMI-IOSCO's 

Recovery of Financial Market Infrastructures (Recovery Guidance), and such 

other guidance as the CMG Members may agree, should shape their approach to 

crisis management, recovery and resolution for LCH Ltd, to the extent permitted 

by their respective laws. 

13 The Bank of England has established the CMG with the objective to enhance 

preparedness for, and facilitate crisis management, recovery and resolution of 

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LCH ltd. This will be achieved through regular meetings and conference calls 

with Parties to discuss, inter alia, recovery and resolution information 

submissions by LCH Ltd, resolution planning options, informational requirements 

and enhancement of communication and cooperation. 

14 The CMG does not have legal personality, and understandings reached at the 

CMG will not be legally binding or enforceable. 

Roles of the Parties 

15 The Bank of England will: 

i. Facilitate and chair meetings of the CMG, at a sufficiently senior level and on at 

least an annual basis. 

ii. Discuss LCH Ltd's recovery plan (the Recovery Plan) in the CMG, taking into 

account the input of the other Parties, and in line with the PFMI and Recovery 

Guidance and such other guidance as the CMG Members may agree. 

iii. Assess through the CMG, taking into account the input of the other CMG 

Members, LCH Ltd's resolvability in line with FSB guidance in the Resolvability 

Assessments annex to the Key Attributes (the Resolvability Assessments) and 

such other guidance as the CMG Members may agree. This wil l identify 

potential actions that CMG Members or LCH Ltd may need to take to ensure 

the resolvability of LCH Ltd, in line with their respective laws and subsequent 

international guidance. 

iv. Create and ultimately maintain a detailed resolution plan for LCH Ltd (the 

Resolution Plan), which considers resolution of LCH Ltd as a whole or in part 

and the financial stability impact in other jurisdictions concerned. To the extent 

permitted by its laws, the Bank of England should share the Resolution Plan 

with the Parties and will coordinate through the CMG, on at least an annual 

basis, the preparation and maintenance of the Resolution Plan of LCH Ltd in 

line with FSB guidance. 

v. To the extent permitted by its laws, alert the other Parties without undue delay 

if LCH Ltd: encounters material financial or operational difficulties; takes 

recovery actions whether or not set out in its Recovery Plan; is likely to enter 

the Bank of England's resolution regime; or if significant supervisory action is 

going to be taken. 

vi. In the event that resolution should become necessary, work with the other 

CMG Members towards the coordinated orderly resolution of LCH Ltd. 

16 Each CMG Member (other than the Bank of England) will, as appropriate: 

i. Participate, at a sufficiently senior level, at meetings of the CMG. 

ii. Provide input to discussion in the CMG of LCH Ltd's Recovery Plan. 

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iii. Provide input to the development and maintenance of the Resolution Plan for 

LCH Ltd. 

iv. Under its statutory and regulatory remit, coordinate with the other CMG 

Members the implementation of the actions set out in the Resolution Plan, and 

coordinate with domestic authorities not party to this Arrangement, to achieve 

greater resolvability of LCH Ltd. 

v. Subject to Annex 1, both during business as usual periods and in times of crisis, 

share information with other Parties as necessary to facilitate resolution 

planning with respect to LCH Ltd, and the development of the Resolution Plan. 

vi. In the event that resolution should become necessary, work with the CMG 

Members towards the coordinated orderly resolution of LCH Ltd. 

vii. In taking resolution actions, endeavour: 

a. not to pre-empt resolution actions by the Bank of England, whilst reserving 

the right to act on its own initiative if necessary to achieve domestic financial 

stability and meet its own supervisory, recovery or resolution obligations 

under law in the absence of effective action by the Bank of England; and 

b. to notify, to the extent permitted by its respective laws, all Parties (including 

the Bank of England) prior to taking any resolution actions. 

17 The CMG Members may, through the CMG process, engage in periodic table top 

simulations or other scenario exercises in order to assess the Resolution Plan 

and to help facilitate resolution planning. 

18 Subject to their respective laws, the CMG Members will inform the other Parties 

of material changes to their crisis management or resolution frameworks through 

regular CMG meetings and teleconferences. 

19 The role of an Observer is to observe the work of the CMG and express views 

where appropriate. 

20 A Party may terminate its membership in the CMG and cease being a Party to 

this Arrangement by notifying the Bank of England in writing. 

Cooperation mechanism and cross-border resolution measures 

21 While it is recognised that each Party must operate within the framework of its 

own laws, each CMG Member will work with the other CMG Members, both 

during business as usual periods and in times of crisis, to identify and, to the 

extent possible, to address any legal and operational impediments to effective 

cross-border resolution of LCH Ltd under the existing legal and operational 

frameworks relating to crisis management, recovery and resolution in a crossborder context in such CMG Members' jurisdictions. 

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22 Where CMG Members have material concerns regarding the Resolution Plan 

they should submit them in writing to the Bank of England, setting out proposed 

remedies. 

23 The Bank of England will organise the practical procedures for the meetings and 

activities of the CMG. The CMG Members should ensure that they provide 

sufficient human resources to take forward the actions determined at the CMG 

meetings, which will require close and continuous working-level cooperation. If 

decided by the Bank of England, in consultation with the CMG Members it may 

be appropriate for some tasks to be taken forward by th e Bank of England 

through LCH Ltd's global supervisory college. 

24 The Parties will maintain up-to-date contact lists which should include contact 

details for key senior and working-level staff. The Parties intend to agree on 

multiple means of telecommunication (e.g., electronic correspondence, 

conference calls) to facilitate rapid and effective information sharing and 

communication among the Parties. The Bank of England will be responsible for 

setting up and keeping such arrangements up-to-date, and for providing the 

necessary infrastructure to facilitate communication (e.g., conference calling 

facilities). The Parties will develop a procedure for making the communications 

detailed in this Arrangement. 

25 The CMG Members should work together to identify critical systems and services 

located in and/or provided by LCH entities within their jurisdiction to LCH entities 

or third parties in the jurisdictions of CMG Members. The relevant CMG 

Members will endeavour to reach a mutual understanding that where critical 

systems and services are needed in a resolution scenario, the Resolution Plan 

should provide for the continuation of such systems and/or services to the extent 

permitted under their respective laws. 

26 In the event of a resolution, the Parties will maintain an open communication 

channel and coordinate with each other, to the extent permitted by their 

respective laws, to ensure consistency of external communications both leading 

up to, at the time of, and for whatever period of time is necessary following 

resolution. 

5 
Bank of England (Resolution Authority) 

Name: Andrew Gracie 

Position: Executive Director 

Date: 30 September 2016 

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Bank of England (Supervisory Authority for FMls)_ 

Name: David Bailey 

Position: Director, Financial Market Infrastructure 

Date: 3~ September 2016 

7 

'' • ,.,e ••.,••·•- ·-----.-·--·--• -·-··· --··--•·••-·• ~--
Prudential Regulation Authority 

Name: Sarah Breeden 

Position: Executive Director, International Banks Supervision 

Date: 30 September 2016 

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·Flnanclal Conduct Authority 

Name: Tom Springbett 

Position: Manager of Trading and Post-Trade, Markets Policy 

Date: 27 July 2016 

9 

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European CeRtral:BaAk--.. 

Name: 

Position:

Date: 

~, i~ 1Li'° o~ *',1::: ~ 

Ai 'J~ 2o(b . 

9 
Bundesaoetalt fur .F-iflanzdienstleistungsaufsicht

-Name: 

Position:

Date: c/4.

A~.....,_ \ce-""c::~S: cJ...: l 

\\eo..ct o\- '-re>i-.. ~ <1.~ ~vcl,-vv,'""''! G~.\ p 

08. -z.u.,( G 

11 

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Deutsche Bundesbank 

Narne::Jochen Met,zger - - / 

Position: Director General, Directorate General Payments and Settlement Systems 

Date: 28 April 2017 

11 
Bundesanstalt fur Finanzmarktstabilisierung

Dr .. ~Ctta Donges.· · 

Clfciir of the Management Board

28 July 2016 

Tanja Kulisch 

Head of Resolution Measures and Crisis Management Division 

28 July 2016 

13 

1#9787276 
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Autorite des marches financiers

Name: Gerard RAMEIX 

Position: President 

Date: li; 

t1Q.J\<1 30 

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13 

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Autorite de contr61e prudentiel et de resoluti,on (Suoervii:;nrv .ti.uthority) 

13 
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Autorite de controle prude11tiel et de resolution (Resolution Authority) r) ~ 

,cu. ~~~(c~f ~, l&e 14>:iJu\\01,.~(:lJ'"'·.Q__ 

Name: 

Position: 

Date: 

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Fe.deral Deposit Insurance Corooration 

Name: Arthur J. Murton 

Position: Director, Office of Complex Financial Institutions 

Date: 20 March 2017 

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Boarrl nf r.overnors oJ,tL1e Federal Reserve System 

Name: Mat1,lrew J. Eichner 

Position: Director, Division of Reserve Bank Operations and Payment Systems

Date: 17 April 2017 

l.!'l'!lOVISD 11r,Of.R 

ll, Li:C.ATF.l' AUTHORJTY 

17 
U.S. Commodltv Futures Tr.adlnA Commission 

Name: John Lawton 

Position: Act\ng Director, Division of Clearing and Risk 

c. 

Date: 3/.21/J ~ 

18 
Reserve Bank of Australia 

Name: Malcolm Edey 

Position: Assistant Governor! Financial System Group 

Date:29 July 2016 

18 

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Japa~ Financial Services Agency 

Name: Norimasa Nishikori 

Position: Director for Exchanges and FM ls, Financial Markets Division 

Date: 12 October 2016 

21 

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R::1nk nf C::in::id;i 

Name: Jeframy S.l. t-arr ~enmal counsel and Corporate Secretary Position: 

Date: 

20 
Eidgenossische Finanzmarktaufsicht 

Name: LEoNt\ RD ~ cLE 

Position: H c f\D o-F Hf\R~EIS 

Date: Al-I J !AL'/ '2.o-11 -q.. 

N~Me. : R.U. t:>Ee.-f ..SCtt-t\E-FE((_ 

Po.sitie,\r\'. \i-Ef'.D cf S,TR.-1\"TE:~ I(. SEe.V\CES 

D!)k : lfY JULY Q..oX=t 

22 

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Banque de France

Name: Denis BEAU 

Position: Director General, Financial Stability and Operations

Date: 16 November 2016 

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European Securities and Markets Authority (Observer)

Name: - \l ... -~~-~~ 

Position: ~'£.:..c._~~~~ ~t..~(__~~ 

Date: :).t\~~~~ 

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ANNEX 1 - Information sharing framework

To the extent permitted by their respective laws, the Parties may from time to 

time share confidential (i.e. non-public) proprietary or supervisory information, 

including but not limited to Resolvability Assessments, the Recovery Plan, the 

Resolution Plan and information regarding the members of LCH Ltd (Confidential 

Information) with each other. To the extent that any Party's authority permits the 

sharing of Confidential Information only upon request, any requests for 

Confidential Information to such Party will be made in writing, to the extent 

practicable in the situation. To the extent that such Confidential Information is 

received by the Parties, such Confidential Information should be used only for 

lawful purposes related to the Parties' financial stability, safety and soundness 

functions or other lawful or regulatory functions, including recovery and resolution 

planning and crisis management. In addition, to the extent permitted by its 

respective laws, each Party will hold confidential all such Confidential 

Information, and will not disclose any of it other than as necessary to carry out its 

lawful responsibi lities and as consistent with the following limitations: 

i. Except as provided below in subparagraph (ii), before a Party discloses any 

Confidential Information obtained pursuant to this Arrangement to any person 

other than a Party, including another governmental entity that is not a 

signatory to this Arrangement, the Party seeking to disclose such Confidential 

Information will request and obtain prior written consent from the Party that 

produced or provided the Confidential Information (the Producing Party), 

ii. In the event that a Party is required by statute or legal process, including a 

legally enforceable demand, to disclose Confidential Information, it will, to the 

extent permitted by its laws, inform the Producing Party about such possible 

onward sharing, in advance of sharing such Confidential Information. If that 

Producing Party does not consent to such disclosure, the Party will take 

reasonable steps, to the extent permitted by its laws, to resist disclosure, 

including by asserting all legal exemptions or privileges as may be available 

to challenge the requirement or demand to disclose Confidential Information. 

2 No privileges or confidentiality associated with information provided by any Party 

are intended to be waived as a result of sharing information as contemplated by 

this Arrangement. 

3 The provision of, or request for, information under this Arrangement may be 

denied on grounds of public interest or national security, or when disclosure 

would interfere with an ongoing investigation. 

4 It is recognised that information pertaining to the Recovery Plan and the 

Resolution Plan is commercially sensitive and confidential, and access by each 

Party should be restricted to those staff who have a genuine need for such 

access. Additionally, such data and information should be handled carefully and 

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appropriately in the same manner applicable to similar information in each Party's 

respective jurisdiction. 

5 The Bank of England will be responsible for providing a secure means of 

exchanging Confidential Information (e.g., secure extranet website). 

6 The Bank of England wi ll be responsible for coordinating with the other Parties in 

connection with the exchange of Confidential Information pursuant to this 

Arrangement for purposes of the CMG. 

7 The confidentiality provisions set forth in this Arrangement will continue to apply 

to all Confidential Information in the possession of any Party to this Arrangement 

even if such Party ceases to be a Party to this Arrangement, by way of 

termination or otherwise. 

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ANNEX 2 - LCH Ltd Crisis Management Group membership 

The Bank of England, as Resolution Authority for LCH Ltd, has established the 

following principles regarding who should be a CMG Member: 

1. Home resolution authority of LCH Ltd. 

2. National competent authority (i.e. supervisor) of LCH Ltd. 

3. Supervisors and resolution authorities of the two to five largest clearing 

members. 

4. Central banks of issue of the most material currencies, based upon products 

cleared by LCH Ltd. and cash collateral accepted by LCH Ltd. 

5. Supervisors and resolution authorities of material resolution entities (primarily 

CCPs, potentially other FMls, and exchanges) in the same group 

6. Supervisors and resolution authorities of interoperating CCPs where the risks 

and level of interoperating activity is considered material to LCH Ltd. 

7. If not already captured above, the relevant authorities located in jurisdictions 

where the Bank of England identifies a general need for that particular 

jurisdiction to be represented to facilitate the resolution of LCH Ltd. 

On the basis of these criteria, as at 1 July 2015 the following authorities (CMG 

Members) were invited by the Bank of England to become a CMG Member, and as a 

result sent one representative per capacity for which they sit on the CMG: 

1 Bank of England (resolution and supervision of FMls i.e. 2 members) 

2 Prudential Regulation Authority 

3 Financial Conduct Authority 

4 European Central Bank 

5 Bundesanstalt tor Finanzdienstleistungsaufsicht 

6 Deutsche Bundesbank 

7 Bundesanstalt tor Finanzmarktstabilisierung 

8 Autorite des marches financiers

9 Autorite de contr61e prudentiel et de resolution (resolution and supervision) 

10 Federal Deposit Insurance Corporation 

11 Board of Governors of the Federal Reserve System 

12 Federal Reserve Bank of New York2 

13 U.S. Commodity Futures Trading Commission 

14 Reserve Bank of Australia 

15 Japan Financial Services Agency 

16 Bank of Canada 

17 Eidgenossische Finanzmarklaufsicht 

18 Banque de France 

2 The Board of Governors of the Federal Reserve System is the signatory to this Arrangement on behalf of both 

the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York. 

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In addition, on 1 July 2015 the European Securities and Markets Authority (ESMA) 

was invited by the Bank of England to become an Observer, and as a result ESMA 

sends a representative to observe the CMG. Collectively, the CMG Members and 

Observer named above constitute the Parties to this Arrangement. 

The Bank of England also has the discretion to invite additional external entities to 

attend CMG meetings on a standing or ad hoc basis, provided that the Bank of 

England provides written notice to the Parties to this Arrangement of the identity of 

such external entities at least 30 days in advance of the relevant meeting. Any 

external entities invited to CMG meetings must agree in writing, pursuant to a 

template agreed upon by all Parties, to abide by the confidentiality requirements set 

forth in Annex 1 before receiving Confidential Information. 

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