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UK regulators publish operational resilience proposals for the financial services sector

The Bank of England, PRA and FCA have published a shared policy summary and co-ordinated consultation papers on new requirements to strengthen operational resilience in the financial services sector.

Building the operational resilience of firms and financial market infrastructures (FMIs) is a shared priority for the three supervisory authorities. The co-ordinated consultation papers build on the concepts set out in the operational resilience Discussion Paper published by the authorities in 2018, addressing many of the proposed policy changes based on the responses received. 

The policy proposals make it clear that firms and FMIs are expected to take ownership of their operational resilience and that they will need to prioritise plans and investment choices based on their impacts on the public interest. If disruption occurs firms are expected to communicate clearly, for example providing customers with advice about alternative means of accessing the service. 

Under the proposals, firms and FMIs would be expected to:

  • Identify their important business services that if disrupted could cause harm to consumers or market integrity, threaten the viability of firms or cause instability in the financial system;
  • Set impact tolerances for each important business service, which quantify the maximum tolerable level of disruption they would tolerate;
  • Identify and document the people, processes, technology, facilities and information that support their important business services; and
  • Take actions to be able to remain within their impact tolerances through a range of severe but plausible disruption scenarios.

Financial services firms have until 3rd April 2020 to submit responses to the proposals.

To complement the policy proposals on operational resilience, the PRA has published a consultation paper on ‘Outsourcing and third-party risk management’. This reinforces the PRA’s expectation that firms should ensure that their important business services are able remain within their impact tolerances even when they rely on outsourcing or third party providers. The FCA’s Consultation Paper on operational resilience also contains a chapter on outsourcing.

Obtain the documents here.

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