HM Treasury has published a paper outlining its approach to designating critical third parties (CTPs) to the UK financial services sector.
Highlights of the paper include:
- Treasury generally expects to base its designations of CTPs on the recommendations of financial regulators, and has asked these regulators to prepare recommendations in a way that supports Treasury’s assessment of the prospective CTP against the statutory criteria for designation;
- Treasury expects that CTPs will comprise only a small number of the overall number of third parties to the financial services sector;
- Treasury predicts that it will take around six months to process each recommendation from regulators and make a decision;
- as designations are made by Regulations, they will be public and visible on the Government’s legislative website;
- the paper sets out an indicative process for designation:
- Receipt of recommendation – Treasury will consider the regulators’ recommendation and then write to the prospective CTP to invite them to send formal representations. Treasury will consult with financial regulators and wider organisations where appropriate;
- Representations – the prospective CTP will submit its formal representations. These should be made in writing within a reasonable period (usually three months);
- Considerations and Decision – Treasury will then consider all evidence and make its final decision (within three months from the end of the period for formal representations), before informing the prospective CTP of the outcome and (if appropriate) publishing the Designation Regulations. The Regulations will outline the date on which designations will come into force;
- Treasury has asked the regulators to regularly assess the list of CTPs. The regulators will also be given the ability to recommend the removal of designations where there are systemic risks to the financial services sector. Treasury anticipates a similar process to designation of CTPs being used.