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.
Related Links
Keywords: International, Banking, Financial Market Infrastructure, FMI, Operational Risk, PFMI, PFMI Level 3, Business Continuity, COVID-19, Cyber Risk, IOSCO, CPMI
Previous Article
APRA Issues Update on Capital Reform Policy Settings for BanksNext Article
EBA Examines Asset Encumbrance in Banking SectorRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards