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  • UK Regulators Launch Consultation on Operational Resilience in Financial Services
    12/05/2019
    The Bank of England, U.K. Prudential Regulation Authority and U.K. Financial Conduct Authority have published a shared policy summary and consultation papers on strengthening operational resilience in the financial services sector. The consultation impacts banks, building societies, PRA-designated investment firms, firms subject to the Solvency II Directive, recognized investment exchanges, CCPs, central securities depositories, payment system operators, FCA enhanced scope SM&CR firms and entities authorized and registered under the Payment Services Regulations 2017 and Electronic Money Regulations 2011. Responses to the consultation should be submitted by April 3, 2020.
     
    The consultation follows the regulators’ joint publication in 2018 of a discussion paper entitled “Building the UK financial sector’s operational resilience”, which aimed to open a dialogue with the financial services industry on achieving change in the operational resilience of firms and financial market infrastructures. “Operational resilience” can be described as the ability of firms and the financial sector as a whole to prevent, adapt, respond to, recover and learn from operational disruptions. The consultation relates to a suite of documents published by the regulators that would embed the approach proposed in the 2018 discussion paper into policy. The documents include:
     
    • A shared policy summary entitled “Building operational resilience: Impact tolerances for important business services”, which provides a summary of the regulators’ proposed approach to operational resilience and sets out the next steps in implementing the approach, including the conclusion of the consultation on the regulators’ policy proposals, the development by the Financial Policy Committee of impact tolerances that determine how quickly financial companies must be able to restore financial services in the event of a cyber incident, and ongoing engagement with firms and financial market infrastructure providers regarding the concepts outlined in the regulators’ policy proposals;
    • A PRA consultation paper, entitled “Operational resilience: Impact tolerances for important business services”, which sets out proposed new PRA rules, as well as a Supervisory Statement and Statement of Policy that aim to improve firms’ operational resilience and set out how the PRA would supervise existing policies on operational resilience; the proposed implementation date is the second half of 2021;
    • An FCA consultation paper, entitled “Building operational resilience: impact tolerances for important business services and feedback to DP18/04”, which sets out a series of proposed requirements, including that firms identify the important business services that could cause harm to consumers or market integrity if disrupted, set impact tolerances and test their ability to comply with impact tolerances; the FCA proposes to publish a Policy Statement including the final rules in 2020; and
    • Three Bank of England consultation papers, entitled “Operational Resilience: Central Counterparties”, “Operational Resilience: Recognised Payment System Operators and Specified Service Providers” and “Operational Resilience: Central Securities Depositories”, which together set out the Bank of England’s proposals for improving the operational resilience of FMIs; the proposed implementation date for the proposals is between Q3 to Q4 of 2021.
     
    Megan Butler, the FCA’s Executive Director of Supervision for Investment, Wholesale and Specialists, delivered a speech on the proposed changes at TISA’s Operational Resilience Forum on December 5, 2019. In it, she discussed the outcomes that are sought by the regulators through the proposals in their consultation papers, including that firms and FMIs understand their vulnerabilities and invest in protecting against them. The FCA expects firms to identify their important business services and map successful delivery back to key underlying resources, test their ability to withstand a severe event and use the test results to identify resilience gaps.
     
    View the shared policy summary, "Building operational resilience: Impact tolerances for important business services".
     
    View the PRA's consultation paper, "Operational resilience: Impact tolerances for important business services.
     
    View the FCA's consultation paper, "Building operational resilience: impact tolerances for important business services and feedback to DP18/04".
     
    View the BoE's consultation paper, "Operational Resilience: Central Counterparties".
     
    View the BoE's consultation paper, "Operational Resilience: Recognised Payment System Operators and Specified Service Providers".
     
    View the BoE's consultation paper, "Operational Resilience: Central Securities Depositories".
     
    View Megan Butler's speech.
     
    View details of the UK Regulators' 2018 discussion paper.
     
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