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Bank of England: Operational Resilience at the heart of the financial system

BoE speech Sasha Mills Operational Resilience


In a recent speech delivered by Sasha Mills, Executive Director at the Bank of England, the importance of operational resilience in Financial Market Infrastructures (FMIs) was underscored. With the March 2025 deadline looming, the Bank of England has set forth clear expectations for FMIs to meet its operational resilience policy.

The Importance of Financial Market Infrastructure (FMI)

Operational resilience might not always be the most thrilling topic, but its significance cannot be overstated. Imagine a scenario where a payment system operator experiences a critical technology failure early in the morning. This disruption ripples through the economy, affecting everything from morning coffee purchases to business transactions, highlighting the crucial need for swift recovery and continuity of services.

FMIs play a fundamental role in the functioning of modern financial markets and the real economy. Whether it's payment systems, clearing, or settlement services, FMIs serve as the backbone of financial transactions. Confidence in these services is paramount for a vibrant and stable economy. Hence, the Bank of England's supervision of key FMIs aims to ensure their operational resilience.

How does the Bank define Operational Resilience?

So, what does operational resilience entail? It's about firms' ability to prevent, respond to, recover from, and learn from disruptions. These disruptions could arise from various sources, including cyber-attacks, natural disasters, or operational errors. The Bank's Operational Resilience Policy sets the framework for FMIs to identify critical business services, define impact tolerances, and demonstrate their ability to recover within those tolerances.

Priorities for FMI Operational Resilience ahead of March 2025
As the March 2025 deadline approaches, FMIs must intensify their efforts to meet regulatory expectations. This involves not only calibrating impact tolerances but also mapping key resources and testing response capabilities under extreme yet plausible scenarios. Collaboration with stakeholders, including participants and third parties, is essential in this process.

Testing is a cornerstone of operational resilience. FMIs must design scenarios that challenge assumptions and encompass a range of potential disruptions. These scenarios should be realistic, considering factors like the cause and scale of the incident, as well as key vulnerabilities. Furthermore, testing methods should evolve beyond tabletop exercises to ensure comprehensive coverage and involvement of the wider ecosystem.

Looking ahead
FMIs must remain vigilant in addressing known vulnerabilities and adapting to evolving risks, such as those posed by emerging technologies. The Bank of England, alongside international regulators, is committed to fostering a culture of resilience and sharing best practices to safeguard the financial system.

In conclusion
Operational resilience is not just a regulatory requirement; it's a cornerstone of financial stability and confidence. By prioritising resilience efforts and embracing collaborative and forward-thinking approaches, FMIs can ensure the smooth functioning of the financial system in both calm waters and stormy seas.

How FourthLine can help:
If you'd like to understand how our enablement and full delivery approaches may benefit your firm's operational resilience programme, enquire here or book a time with one of our consultants here now
Read our Outsourcing and Third-Party Risk Management Technical Paper
Read our Operational Resilience Insight Deck
May 1, 2024
Jakes de Kock
Jakes is FourthLine's Marketing Director. He specialises in omni-channel, tech-enabled inbound marketing strategies to drive business growth within the b2b sector.
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