UK financial authorities announce new regulation to strengthen third party service resilience for financial firms.
- The Financial Conduct Authority (FCA) and Bank of England are implementing measures to oversee critical third-party service providers.
- These rules aim to mitigate risks like cyber-attacks or outages, which could disrupt financial stability.
- The regulations draw parallels with international standards, including the EU’s Digital Operational Resilience Act.
- Governments and regulators will identify third parties subject to these rules, demanding rigorous accountability measures.
The UK financial regulators, including the Financial Conduct Authority (FCA) and the Bank of England, have introduced groundbreaking rules aimed at fortifying the resilience of third parties critical to financial firms. The decision comes in response to growing concerns about the sector’s reliance on a limited number of external service providers, whose failure could have significant repercussions for consumers and businesses alike.
Recognising the potential threats posed by events such as cyber-attacks or power outages, these new regulations are designed to provide a robust framework that mitigates such risks. By aligning closely with established international standards, notably the EU’s Digital Operational Resilience Act, the UK seeks to ensure its financial infrastructure remains stable and reliable under adverse conditions.
A crucial aspect of this new regime involves selecting which third parties will be subject to these rules. This decision will be made by the government based on advice from financial regulators, ensuring that only those entities posing significant risk to financial stability are designated for heightened scrutiny.
Once designated, these third parties will face stringent requirements. They will need to furnish regular assurances and detailed information to regulators concerning their service operations. Moreover, these entities are obliged to conduct exhaustive resilience testing and engage in scenario-based exercises, some of which will require collaboration with their affiliated financial firms and infrastructures.
Additionally, in the event of major incidents, such as cyber-attacks or natural disasters, these third parties must promptly report the occurrences to the relevant financial authorities. This rapid reporting is expected to enhance the overall crisis management and response strategies within the sector, bolstering trust and operational continuity.
These new rules promise to significantly bolster the resilience of the financial sector against potential disruptions from third-party service providers.
