On 30 April 2024, the Bank of England (BoE) published a speech setting out some of its key expectations for financial market infrastructures (FMIs) in relation to operational resilience, ahead of the March 2025 deadline for these FMIs to meet the BoE’s policy in this area.

The speech, delivered by the BoE’s executive director Sasha Mills, begins by reminding firms of the outcome the regulator is seeking to achieve by March 2025 with its operational resilience policy – that crucial parts of FMI are able to respond to and recover from an extreme but plausible disruption scenario before the market or payments ecosystem it serves is destabilised. Ms Mills then moves on to talk about where the focus of such FMIs should be in terms of building this resilience.

Ms Mills discusses topics including:

  • The importance of FMI.
  • How the BoE defines operational resilience.
  • Priorities for FMI operational resilience ahead of March 2025.
  • What the BoE expects to see over the next year from FMIs.
  • The broader operational resilience picture.

Key points flagged in the speech as to what the BoE expects to see from FMIs over the next year include:

  • Ensuring that their response plans and capabilities are robust and, where not, that strategic investment is being made – this is a key requirement.
  • For the calibration of impact tolerances, the BoE expects to see greater engagement than it has seen thus far between FMIs, their participants, and the wider market.
  • The approach and method FMIs use to test disruption to important business services still needs significant work.
  • FMIs should be working to ensure that the ‘extreme but plausible’ scenarios they have planned for directly link to the risks and vulnerabilities they face and have mapped – this is not an ‘off the shelf’ set of scenarios.
  • FMIs need to do further work to improve on the sophistication of their testing approaches.

Ms Mills concludes by setting out five key messages:

  • FMIs are important to financial stability.
  • Operational disruption will happen – and firms need to be able to respond to and recover from these incidents.
  • Deep and collaborative thinking is required about the impact of FMIs’ business on both their participants and the wider financial system.
  • Detail is important – testing of scenarios must provide precision around (a) the cause and scale of the incident, and (b) the key risk factors and vulnerabilities.
  • FMIs should test the unlikely – yesterday’s ‘unlikely’ may be tomorrow’s reality, and FMIs need to consider this when deciding what scenarios are extreme but plausible.