An overview of the 2018 FMI Administration Rules

Infrastructure companies are key to a country’s economy. They provide essential services to industries by assisting economic development and connecting people. The importance of their role is recognised by the recently updated Financial Market Infrastructure Administration (England & Wales) Rules 2018 (the FMI Rules) which came into force on 4 August 2018.

The aim of the FMI Rules is to bring into force a special administration regime for infrastructure companies. It also deals with the procedure in the event of an actual or imminent insolvency, aiming to mitigate the risk of any wider financial disruption occurring as a consequence.


The FMI Rules stem from the Financial Services (Banking Reform) Act 2013 (BRA). This established special administration regimes for financial market infrastructure companies operating payment systems and security settlement systems. It also designated services to such operators vital to our country’s economic development and prosperity, such as transportation, sewage, water and electric systems (Infrastructure Companies) in the form of the FMI administration.

A special administration regime is a modified insolvency regime, which provides an administrator with ‘special objectives’ such as the continuity of critical services which take priority over the usual prescribed administration objectives.

Pursuant to the BRA, the objectives of FMI administration are:

  • To ensure that the relevant payment or securities settlement system continues to operate
  • That any protected activities, such as a clearing house, continue to be carried on in the event of insolvency
  • That it becomes unnecessary for the FMI administration order to remain in force for the above purposes by either:
    a) rescuing the business as a going concern, or failing that
    b) transferring as much of the business as necessary to ensure that the particular payment or settlement payment system continues as a going concern and is transferred to one or more companies.

Who can apply for FMI administration?

Only the court can appoint FMI administrators following the Bank of England applying for an FMI administration order and nominating an insolvency practitioner to act as administrator. The application can be premised on the basis that the Infrastructure Company cannot pay its debts or is likely to be unable to pay its debts.

The Bank of England’s involvement in the administration process is to ensure that the particular payment and settlements systems continue to be operative and the role of the Bank of England captures many of the functions that would normally be carried out by creditors or a creditors’ committee in a corporate insolvency.

The FMI Rules also deal with the following matters:

  • Contents of an application for an FMI administration order made by the Bank of England and the accompanying statement of the proposed administrator and the witness statement made on behalf of the Bank of England.
  • The application of the Insolvency (England and Wales) Rules 2016, with necessary modifications, for the conduct of the special administration regime.

Course of FMI administration

The Bank of England has the power to direct the FMI administrator to take, or refrain from taking, specified actions, with regard to acting in the public interest. For instance, the Bank of England may wish to direct the FMI administrator to prioritise critical services to maintain the stability and confidence in the financial system. Section 120 of the BRA provides statutory immunity from liability in damages to the FMI administrator in respect of any action or inaction taken pursuant to such a direction.

There are provisions to ensure the continuity of essential supplies to the Infrastructure Company during the course of the administration. This also includes a restriction on third parties terminating supplies in certain circumstances.

An FMI administrator’s proposals must be approved by the Bank of England.


Infrastructure Companies are essential to the effective operation of the country’s financial system. Any suspension of their operation would have a severely detrimental impact upon the wider financial sector and the economy of the country as a whole, given the substantial number of transactions processed by such entities for consumers and businesses.

The FMI Rules are designed to put in place a system to ensure the effective continuity of key payment and security settlement companies. This should prevent any onward contamination to the wider financial sector and economy as a whole, should an Infrastructure Company fail.

Read other items in the Commercial Brief - September 2018