CPMI-IOSCO Assess Continuity Planning of Market Infrastructures
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs. The report also presents a high-level summary of the responses of the financial market infrastructures to the COVID-19 pandemic in some member jurisdictions. It also identifies increased cyber risk and scope for improvement in certain areas.
The report finds that all the surveyed financial market infrastructures have operational reliability objectives, focusing on system availability and recovery time; they reportedly review their business continuity plans at least annually and test them regularly. However, the report found that the business continuity management of some, and potentially many, financial market infrastructures does not seem to aim to resume operations in a timely way, including in the event of a wide-scale or major disruption. The key findings of the exercise are summarized below:
- An identified concern relates to timely recovery in the event of a wide-scale or major disruption. Based on the information provided by the participating market infrastructures, there are doubts on whether their business continuity plans are designed to ensure that critical information technology systems can resume operations within two hours following disruptive events and enable the financial market infrastructure to complete settlement by the end of the day of the disruption, even in case of extreme circumstances. CPMI and IOSCO expect the relevant financial market infrastructures and their supervisors to address this as a matter of the highest priority.
- Cyber risk was another identified area of concern. A few financial market infrastructures in the sample did not provide specific business continuity plan objectives with respect to cyber risk. Among the financial market infrastructures that have specific business continuity plan objectives with respect to cyber risk, only a few explicitly acknowledged the breadth and depth of potential cyber attacks and the complexities of cyber risks that their business continuity plans may not be able to cover.
The report also noted that overall the financial market infrastructures have not experienced service disruptions during the pandemic. Financial market infrastructures have observed that the pandemic highlighted operational risks posed by third parties such as critical service providers. No major incidents involving third parties were reported during 2020. However, financial market infrastructures noted an increased threat of cyber risks, especially in remote working environments. In this context, financial market infrastructures have adopted enhanced cyber-security monitoring, with extra vigilance regarding their internal VPN networks and have trained their staff thoroughly on threats arising from remote access.
This review was a part of the regular monitoring of the implementation of the Principles for Financial Market Infrastructure (PFMI), which set international standards for payment, clearing, and settlement systems. Implementation is being monitored on three levels. Level 1 self-assessments report on whether a jurisdiction has completed the process of adopting legislation and other policies that will enable it to implement the Principles and Responsibilities. Level 2 assessments are peer reviews of the extent to which the content of the jurisdiction's implementation measures is complete and consistent with the PFMI. Level 3 peer reviews examine consistency in the outcomes of implementation of the Principles by financial market infrastructures and implementation of the Responsibilities by authorities. This report represents the Level 3 assessment of consistency in the outcomes of the implementation of the PFMI.
Keywords: International, Banking, Financial Market Infrastructure, FMI, Operational Risk, PFMI, PFMI Level 3, Business Continuity, COVID-19, Cyber Risk, IOSCO, CPMI
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
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