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UK firms face 2022 deadline for resilience rules

Regulations digitalRegulators in the UK have given investment firms a one year deadline to improve their operational resilience.

The policy statement (PS21/3) has been jointly issued by the Prudential Regulation Authority (PRA), the Financial Conduct Authority (FCA) and the Bank of England.

The rules come into effect on March 31, 2022, by which time firms must be able to identify vulnerabilities in their operational resilience and set impact tolerance levels for their most important business lines

They will then have three years in which to perform mapping and testing and make the necessary investment to operate consistently within their impact tolerances.

In addition to investment firms, the regulations also apply to banks, insurers, exchanges, building societies and payment providers.

“The disruption caused by coronavirus (Covid-19) has shown why it is critically important for firms to understand the services they provide and invest in their resilience,” stated the FCA.

“Operational disruptions can cause wide-reaching harm to consumers and pose a risk to market integrity, threaten the viability of firms and cause instability in the financial system,” adds the statement.

In acknowledgment of the way that operational risk has risen up the agenda, the FCA has also stated that it “retains the view that operational resilience is at least as important as financial resilience”.

According to tech consultancy Capco, the rule change presents two main difficulties for firms – firstly, the one year deadline, given that many firms will have expected to have several years to comply.

The second issue is the broad and open-ended scope of the rules, designed to prevent operational resilience becoming a “tick-box exercise” and instead becoming a “discipline embedded within firms and demonstrably overseen and led by senior management,” said Will Packard, operational resilience lead at Capco.

“This is essentially an open-ended exercise, and firms will need to show real discipline and persistence to meet the spirit of the regulations,” said Packard.

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