The Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have today published a joint discussion paper on an approach to improve the operational resilience of firms and financial market infrastructures.

The tripartite group is looking for better standards of operational resilience through increased focus on setting, monitoring and testing specific impact tolerances for key business services, which define the amount of disruption that could be tolerated.

“The challenges for operational resilience have become even more demanding given a hostile cyber environment and large scale technological changes,” it stated. “As recent disruptive events illustrate, operational resilience is a vital part of protecting the UK’s financial system, institutions and consumers.”

The discussion paper focuses on how the provision of financial markets products and services can be maintained within reasonable tolerances regardless of the cause of disruption, and reinforces the need for improved response capabilities. “The speed and effectiveness of communication with the people and institutions most affected, in particular customers, should be at the forefront of every firm’s response,” it stated.


Operational resilience in the financial sector (Source: FCA)

The Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) identify a number of important elements of approach, amongst them:

• focusing on the continuity of the most important business services as an essential component of managing operational resilience;
• setting board-approved impact tolerances which quantify the level of disruption that could be tolerated; and
• planning on the assumption that disruption will occur as well as seeking to prevent it.

The approach to operational resilience set out in this DP is consistent with the FPC’s recent plans to establish its tolerance for disruption to financial services from cyber incidents, with both focusing on continuity of business services. The supervisory authorities may expect some firms and FMIs to consider the FPC’s impact tolerance when they set their own tolerances.

The supervisory authorities are encouraging responses to questions posed in the DP from all types of firms and FMIs, trade associations, consumer bodies, individuals and businesses as users of financial services, and especially those who have suffered harm from disruptive events.

The discussion period ends on 5 October 2018.

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