Building the UK financial sector’s operational resilience

The Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have published a joint discussion paper (DP) on an approach to improve the operational resilience of firms and financial market infrastructures (FMIs).
Published on 05 July 2018

Bank of England Discussion Paper 1/18 | PRA Discussion Paper 1/18 | Financial Conduct Authority Discussion Paper 18/04

Introduction

This discussion paper (DP) is issued jointly by the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA), and the Bank of England (the Bank) in its capacity of supervising financial market infrastructures (FMIs), (collectively 'the supervisory authorities').The purpose of this DP is to share the supervisory authorities’ thinking regarding operational resilience and obtain feedback. 

We welcome responses to the questions from asked throughout the DP (listed in Chapter 8). Feedback is welcomed from all parts of the financial sector, as well as from consumers, market participants and other stakeholders, including other regulatory organisations.

The importance of operational resilience

Operational disruptions to the products and services that firms and FMIs provide have the potential to cause harm to consumers and market participants, threaten the viability of firms and FMIs, and cause instability in the financial system. This DP focuses on how the provision of these products and services can be maintained. Operational resilience refers to the ability of firms, FMIs and the sector as a whole to prevent, respond to, recover and learn from operational disruptions.

Discussion paper structure

  • Chapter 2 explains why the supervisory authorities consider that managing operational resilience is most effectively addressed by focusing on business services, rather than on systems and processes. 
  • Chapter 3 explains that financial stability rests on the operational resilience of individual firms, FMIs and the system as a whole.
  • Chapter 4 suggests that the boards and senior management of firms and FMIs would set their own tolerances for operational disruption, on the assumption that that some or all supporting systems and processes will fail.
  • Chapter 5 expands the idea that firms and FMIs would develop impact tolerances for important business services.
  • Chapter 6 explains how supervisors could gain assurance that firms and FMIs ensure the continuity of their most important business services, and that boards and senior management are sufficiently engaged.
  • Chapter 7 summarises some of the key concepts set out in the DP.
  • Chapter 8 is a complete list of the questions in the DP.

Responses and next steps

The supervisory authorities welcome feedback on this DP, including any specific suggestions, issues, or potential alternatives.

The supervisory authorities will work together to reflect on the feedback as they: develop potential proposals for consultation; develop their respective supervisory approaches; and work with the FPC as it develops its own impact tolerances. The supervisory authorities will also be drawing together existing policy material related to operational resilience in order to support firms and FMIs to build their resilience.

Please send any responses to DP1_18@bankofengland.co.uk by Friday 5 October 2018.

PDFDiscussion Paper

PDFPress release

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