UK financial regulators have introduced new rules aimed at increasing the resilience of technology and other third-party services crucial to the financial sector.
This move comes as financial firms and financial market infrastructures (FMIs) increasingly depend on a limited number of critical third-party providers.
The importance of these providers is magnified by their potential to enhance competitiveness within the sector. However, disruptions, such as cyber-attacks or power outages, could have far-reaching effects, potentially jeopardizing the stability of the UK’s financial system.
In response to these vulnerabilities, the government granted regulatory bodies new powers in 2023 to oversee these critical service providers to mitigate financial stability risks.
Following extensive consultations and collaborations with the industry, the Financial Conduct Authority, Bank of England, and Prudential Regulation Authority have now outlined how they will employ these new powers. These regulations are designed to align with international standards and are similar to the EU’s Digital Operational Resilience Act.
The newly established rules will enhance the resilience not only of the services provided to individual firms but also of the entire UK financial services sector. This strategic enhancement aims to bolster market stability and ensure that the UK remains an attractive destination for business.
Despite these new measures, the responsibility of financial firms and FMIs to maintain resilience against operational shocks and manage third-party relations remains unchanged, adhering to existing outsourcing and operational resilience rules. The regulators have encouraged ongoing industry engagement as these rules are implemented over the coming months.
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