Harry WellsGareth Truran, BoE Director of Prudential Policy, has delivered a speech on current proposals for the UK regime for critical third parties (CTPs), at the TechUK summit.
Summarising the regulators’ current proposals, Mr Truran set out that CTPs, firms and regulators will need to work together during implementation to enhance the operational resilience of the UK financial sector.
The speech highlighted that the regime for CTPs is an important part of BoE’s strategy to ensure the UK financial sector is as resilient as possible to operational disruption. BoE will reach beyond the resilience of regulated individual firms to assess the operational resilience of the sector as a whole, given financial firms are increasingly using third parties to deliver important parts of their operations and services. Highlights include:
- the proposed regime for CTPs will complement, but not replace, the responsibility of individual regulated firms and their senior management;
- the objective of the CTP regime is highly specific. It is designed to help manage risks to the stability of, or confidence in, to the UK financial system posed by systemic third party concentration risk;
- regulators need to develop a robust framework to identify potential CTPs and to inform their designation recommendations, including a process to help identify those third parties where disruption can cause issues which may threaten financial stability;
- CTPs will need to develop their understanding of their role in supporting the financial services sector, and how the new CTP regime and their future actions under it can manage financial stability risks; and
- to deliver the overall objective of the proposed regime, CTPs will need to bring an additional layer of financial sector-wide collaboration to their incident management practices.
BoE’s proposals for CTPs are currently open for consultation, through a joint consultation by BoE, PRA and FCA. The consultation closes on 15 March.