On 29 March 2021, 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’ jointly issued a paper on Operational Resilience.
A key priority for the supervisory authorities is to put in place a stronger regulatory framework to promote the operational resilience of firms and FMIs. To this end, the supervisory authorities published a joint Discussion Paper on Operational Resilience in 2018 setting out an approach to operational resilience. Following this, the supervisory authorities published a suite of consultation documents (‘the consultations’) in December 2019 to embed this approach into policy.
The proposals were designed to improve the operational resilience of firms and FMIs and protect the wider financial sector and UK economy from the impact of operational disruptions. The consultations proposed requirements and expectations for firms and FMIs to:
- identify their important business services by considering how disruption to the business services they provide can have impacts beyond their own commercial interests;
- set a tolerance for disruption for each important business service; and
- ensure they can continue to deliver their important business services and are able to remain within their impact tolerances during severe (or in the case of FMIs, extreme) but plausible scenarios.
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper 29/19 Operational resilience: Impact tolerances for important business services. It also contains the PRA’s final policy, as follows:
- a new Operational Resilience Parts of the PRA Rulebook
- amendments to the Group Supervision Part of the PRA Rulebook
- a new Supervisory Statement SS 1/21 ‘Operational resilience: Impact tolerances for important business services’; and
- a new Statement of Policy ‘Operational resilience’
This PS is relevant to:
- UK banks, building societies, and PRA-designated investment firms (banks); and
- UK Solvency II firms, the Society of Lloyd’s and its managing agents (insurers).
The Operational Resilience Parts will be effective from Thursday 31 March 2022. To comply with the rules, firms should contact their supervisors to agree their plans for meeting policy requirements.
SS1/21 will be effective from Thursday 31 March 2022.
