Access to cash Wholesale cash distribution Ensuring an effective, resilient and sustainable wholesale cash infrastructure
HM Treasury’s principal policy aim is to support access to cash through ensuring that the wholesale cash infrastructure is effective, resilient, and sustainable in the long-term. In this respect sustainability means viability of the system over time. Furthermore, this policy also seeks to ensure that risks to financial stability and/or confidence in the UK financial system that would arise through the creation of a systemic entity in the event of a failure or wider disruption in the wholesale cash network are effectively managed. The government has also designed the regime so that it can accommodate commercial solutions to the challenges faced by the industry, as these emerge over time, whilst protecting the effectiveness, resilience, and sustainability of the wholesale cash distribution system.
	The Act provides the Bank with the powers to oversee the wholesale cash industry. There are two levels to the regime. Firstly, the Bank will be enabled to regulate the market activities of the wholesale cash industry (the market oversight regime) to ensure it remains effective, resilient and sustainable. Secondly, the Bank will have the ability to prudentially regulate a systemic entity in the market, should one form in the future (the prudential regime). HM Treasury, after consultation with the Bank and the industry, would designate entities as within scope of either or both parts of the regime. HM Treasury will also have a similar power to un-designate entities if required. HM Treasury may only recognise an entity as having systemic significance, and therefore being in scope of the prudential regime, if they are satisfied that a deficiency or disruption to their wholesale cash distribution activities would threaten the stability of or confidence in the UK financial system.
	For the market oversight regime, all entities which provide wholesale cash activities or provide financial support in relation to these activities, could be brought under the regime. HM Treasury will also have the power to designate a service provider to the industry under the regime, if required.
	Under the market oversight regime, the Bank will be given the power to require the provision of information. This is for the purpose of allowing the Bank to form an aggregate picture of the overall health of the industry and identify emerging risks. The Bank would also have the power to give directions to designated firms. This would be to require or prohibit taking of actions or to set standards firms must meet. There would also be powers given to the Bank to enable them to publish principles and codes of practice industry must follow. The Bank would also be given powers of inspection, powers to enforce the regime, and would be enabled to levy fees for the operation of the scheme and to levy penalties for non-compliance. For the fees, these must relate to a scale of fees approved by HM Treasury and Parliament. Industry will be consulted on the development of this fee scale.
	In relation to prudential regulation, the Bank would exercise the same powers used in the market oversight regime, but towards the objective of managing risks to financial stability, and to maintain confidence in the UK financial system. The failure of a systemic entity could threaten the stability or confidence in the financial system through a loss or severe reduction of access to cash as a means of payment for consumers as well as a potential loss of confidence in cash as a payment method. Therefore, the Bank would have the power to mitigate such a failure by applying an appropriate Special Administrative Regime (SAR) to the entity in the event of its failure or impending failure.
	Given the nature of governance and financial support for wholly owned state entities, there is a power for HM Treasury to either not apply or apply with modifications any of the regulatory and enforcement provisions in relation to companies wholly owned by the Crown. Wholly owned state entities would also not be in scope of the prudential regime.
	The Bank will publish a statement on its regulatory approach before exercising its powers. This will set out how the Bank intends to use its powers. The Bank will consult with industry on the development of its regulatory approach and this statement.