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Regulators call for better protection of financial system

The Bank of England (BoE), Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have published a paper calling for a new approach to improve the operational resilience of firms and financial markets.


Amber-Ainsley   Pritchard

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Amber-Ainsley   Pritchard
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The discussion paper envisages that boards and senior management can achieve 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 FCA said the challenges for operational resilience have become more demanding given a hostile cyber environment and large scale technological changes.

 

It added that operational resilience is a vital part of protecting the UK’s financial system, institutions and consumers.

 

The paper reinforces the need for firms and financial market infrastructures (FMIs) to develop and improve response capabilities so that any wider impact of disruptive events is contained.

 

The regulators said there is not currently an international framework supporting the regulation of financial services’ operational resilience, so they will share their insights with the global regulatory community.

 

Andrew Bailey, chief executive of the FCA, Jon Cunliffe, deputy governor of financial stability at the BoE, and Sam Woods, deputy governor for prudential regulation and chief executive of the PRA, said: “A resilient financial system is one that can absorb shocks rather than contribute to them.

 

“The financial sector needs an approach to operational risk management that includes preventative measures and the capabilities – in terms of people, processes and organisational culture – to adapt and recover when things go wrong.

 

“As recent high-profile disruptive events have shown, the speed and effectiveness of communications with the people most affected, including customers, is an important part of any firm’s or FMI’s overall response to an operational disruption.”

 

This discussion paper, which is open for comments until October 5, seeks to start a dialogue with the financial services industry on achieving a step change in structural protection.

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