HMT Publishes Policy Statement on Critical Third-Party Regime
Her Majesty's Treasury (HMT) published a policy statement proposing the approach to mitigate risks from critical third parties, such as cloud-based service providers, to the UK finance sector. Additionally, HMT and the Japanese Financial Services Agency established a UK-Japan Financial Regulatory Forum.
Policy statement on "Critical" Third-Party Regime
The statement provides details on HM Treasury’s proposal for reducing the risks of systemic disruption to the financial regulators’ objectives, including financial stability and market confidence. Under this proposal, HM Treasury, in consultation with the financial regulators and other bodies, will designate certain third parties that provide services to firms as "critical." The financial regulators will then be able to make rules, gather information, and take enforcement action, in respect of certain services that critical third parties provide to firms of particular relevance to the regulators’ objectives (which the regulators refer to as "material" services). The proposed regime will allow financial regulator to directly oversee services that critical third parties provide to firms. This will enable the regulators to ensure that services critical third parties provide to firms in the finance sector are resilient, thus reducing the risk of systemic disruption. The proposed regime will provide financial regulators with powers to:
- request information directly from critical third parties on the resilience of their material services to firms, or their compliance with applicable requirements.
- commission an independent "skilled person" to report on certain aspects of a critical third party’s services.
- appoint an investigator to look into potential breaches of requirements under the legislation.
- interview a representative of a critical third party and require the production of documents.
- enter a critical third party’s premises under warrant as part of an investigation.
As a next step, the UK government intends to legislate the aforementioned critical third-party regime, to publish a joint discussion paper that details how these powers granted to financial regulators might be exercised, and to seek views from industry on the most effective and proportionate way to do so. The discussion paper will also explore potential specific ways for the financial regulators to coordinate the exercise of their powers with overseas financial regulators, and UK authorities and regulators from outside the financial services sector.
UK-Japan Financial Regulatory Forum. HM Treasury, in collaboration with the Japanese Financial Services Agency, established a UK-Japan Financial Regulatory Forum, setting out provisions for the exchange of information, consultation, deference, technical mediation, and cooperation on diversity in finance, sustainable finance, and other emerging issues. The Forum will support closer cooperation on areas of mutual interest, including public-private partnerships in insurance, sustainable finance, and financial innovation. The UK and Japan also discussed their approaches for supporting international firms to access their markets, cross-border data flows, diversity in financial services, and opportunities in the insurance, asset management and fintech sectors.
Related Links
- Policy Statement on Third Party Regime
- Press Release on UK-Japan Financial Regulatory Forum
- Letter on UK-Japan Financial Regulatory Forum (PDF)
Keywords: Europe, UK, Banking, Third-Party Risk, Cloud Service Providers, Systemic Risk, Sustainable Finance, Insurance, Regtech, UK-Japan Financial Regulatory Forum, Operational Resilience, JFSA, HM Treasury
Featured Experts
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous Article
Danish Central Bank Assesses Financial Stability of BanksNext Article
OCC Publishes Testimony of Deputy Comptroller on AIRelated Articles
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
ISSB Standards May Become Effective from January 2024
The International Organization of Securities Commissions (IOSCO) welcomed the confirmation statement by the International Sustainability Standards Board (ISSB) setting out its progress in the development of its first sustainability-related corporate disclosure standards.
