United Kingdom (and EU regulation)

BoE consults on FMI outsourcing and third party risk management

By Simon Lovegrove (UK) on April 25, 2022 Posted in Regulation and compliance, United Kingdom

On 14 April 2022, the Bank of England (BoE) published the following consultation papers concerning outsourcing and third party risk management in financial market infrastructures:

Outsourcing and third party risk management: Central Counterparties.
Outsourcing and third party risk management: Central Securities Depositories.
Outsourcing and third party risk management Recognised Payment System Operators and Specified Service Providers.

The consultation papers contain draft supervisory statements on outsourcing and third party risk management for central counterparties (CCPs), central securities depositories (CSDs) and recognised payment system operators (RPSOs) and specified service providers (SSPs).

The proposals in the consultation papers are partly a response to evolving business models and industry practices, which place increasing reliance on services and technologies provided by third parties. The draft supervisory statements sets out how the BoE expects CCPs, CSDs, RPSOs and SSPs to comply with the range of existing guidelines and requirements on outsourcing and third party risk management, throughout the lifecycle of an arrangement.

The draft supervisory statement for CCPs is intended to align with and complement the regulatory framework on operational resilience for CCPs published in March 2021 and the supervisory expectations in relation to material outsourcing to the public cloud set out in the BoE’s letter to CCPs in September 2021. The draft supervisory statement for CSDs is intended to align with and complement the regulatory framework on operational resilience for CSDs published in March 2021 and the supervisory expectations in relation to material outsourcing to the public cloud set out in the BoE’s letter to CSDs in September 2021. The draft supervisory statement for RPSOs and SSPs is intended to align with and complement the regulatory framework on operational resilience for RPSOs and SSPs published in March 2021 and the supervisory expectations in relation to material outsourcing to the public cloud set out in the BoE’s letter to RPSOs and SSPs in September 2021.

The deadline for comments on the consultation papers is 14 July 2022.