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    BoE, PRA, and FCA Consult to Strengthen Operational Resilience

    December 05, 2019

    BoE, PRA, and FCA published a shared policy summary and coordinated consultation papers on new requirements to strengthen operational resilience in the financial services sector. The consultation papers build on the concepts set out in the discussion paper on operational resilience, which was published in July 2018. The consultation period closes on April 03, 2020. While speaking at the Operational Resilience Forum in London, Megan Butler of FCA outlined regulator views on the outcomes being sought through this consultation on operational resilience.

    Under the proposals, firms and financial market infrastructure would be expected to:

    • Identify their important business services that if disrupted could cause harm to consumers or market integrity and 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
    • Take actions to be able to remain within their impact tolerances through a range of severe but plausible disruption scenarios

    Detailed proposals from each supervisory authority have been set out in the package of publications and are as follows:

    • PRA issued a consultation paper (CP29/19) with the proposed PRA rules (Appendix 1 and 2), a supervisory statement (Appendix 3), and a Statement of Policy (Appendix 4) designed to improve the operational resilience of firms and protect the wider financial sector and UK economy from the impact of operational disruptions. The draft Statement of Policy sets out how PRA proposes to supervise existing policies in the light of the proposed new operational resilience rules and expectations. The proposals aim to address risks to operational resilience, including risks arising from the interconnectedness of the financial system and the complex and dynamic environment in which firms operate. Subject to the feedback received, PRA will work to develop final Operational Resilience Parts for publication in the second half of 2020. The proposed implementation date for the proposals is the second half of 2021. This consultation paper is relevant to all UK banks, building societies, and PRA-designated investment firms (banks), along with the UK Solvency II firms, the Society of Lloyd’s, and its managing agents (insurers).
    • BoE has published individual consultation papers and draft supervisory statements consulting on its operational resilience expectations for central counterparties and central securities depositories. The proposed implementation date for the proposals is the fourth quarter of 2021. Also, BoE has published a consultation paper, a draft supervisory statement, and a draft operational resilience chapter of the Code of Practice for recognized payment system operators and specified service providers. The proposed implementation date for the proposals related to recognized payment system operators and specified service providers is Autumn 2021. In the consultation papers, BoE sets out its proposals for improving the operational resilience of financial market infrastructures and protecting the wider financial sector and UK economy from the impact of operational disruptions.
    • FCA launched a consultation (CP19/32) on in which it proposes that firms identify their important business services, set impact tolerances for each important business service, test their ability to remain within their impact tolerances, and develop internal and external communications plans for when important business services are disrupted. FCA will consider the feedback and publish the finalized rules in a policy statement next year. The proposals in the published consultation papers will apply to banks, building societies, PRA-designated investment firms, Solvency II firms, Recognized Investment Exchanges, Enhanced scope Senior Managers & Certification Regime (SM&CR) firms, and entities authorized or registered under the Payment Services Regulations 2017 and Electronic Money Regulations 2011.

     

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    Comment Due Date: April 03, 2020

    Keywords: Europe, UK, Banking, Insurance, Securities, Operational Resilience, FMI, Central Counterparty, CP 29/19, CP 19/32, Operational Risk, Business Continuity, BoE, PRA, FCA

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