On October 1, the Institute of International Finance (IIF) and the Global Financial Markets Association (GFMA) submitted a joint response letter to the UK Authorities’ consultation papers on operational resilience.
In December 2019, the UK Prudential Regulation Authority, Financial Conduct Authority and Bank of England released a package of proposals to establish an operational resilience regulatory framework for UK firms and financial market infrastructures. The UK authorities extended the comment period for their proposals to October 1, 2020 due to the impact of COVID-19.
As set out in the response letter, the Industry appreciates the UK’s thought leadership on how to strengthen operational resilience and their collaborative efforts with both the public and private sectors since the release of the UK Financial Sector Authorities’ Discussion Paper on this topic in July 2018. As other jurisdictions and global standard setters publish their views on strengthening operational resilience, we encourage the UK to continue to actively engage with the members of the global working groups in which the UK participates, for example through the Basel Committee on Banking Supervision (BCBS), in pursuit of as much regulatory alignment as possible on the outcomes sought and how to demonstrate resilience across jurisdictions. It is widely recognized that strengthening operational resilience will be an iterative process that requires effective collaboration among financial institutions and regulators around the world on an ongoing basis.
The following key messages are emphasized in the response letter:
- The need for regulatory consistency, internationally and within jurisdictions, given that a financial firm’s businesses and associated processes may span multiple geographies.
- The importance of continued public-private collaboration on the UK’s new operational resilience concepts, including beyond the consultation period: this will be an iterative process and it will take time to mature what are some new and complex concepts.
- Operational resilience should focus on the alignment of outcomes that promote financial and market stability as well as firm safety and soundness by protecting and resuming key services during operational disruptions, enabling firms to continue serving the needs of their clients.
- The desire to continue striving for a principles-based, risk-based and outcomes-focused approach where firms have the flexibility to determine the specifics of their own operational resilience programs in a way that is relevant and proportionate to their business and risk profile, including leveraging existing broader risk management frameworks acknowledging that these may need to be augmented or supplemented with a new but compatible framework, as necessary.
- The Industry needs flexibility on how firms demonstrate resilience outcomes (i.e., principles-based, without prescribing specific metrics), allowing the necessary time for collaboration with supervisory teams (potentially cross-border) and a thoughtful implementation timetable.