The challenge
From Relationship to Readiness: Building a Stressed Exit Plan for a UK Private Bank's Critical Payment Technology Supplier
Hampden and Co Bank is a UK private bank serving high-net-worth individuals and their families, authorised and regulated by the Prudential Regulation Authority and the Financial Conduct Authority. The bank's Important Business Services include making outbound payments, lending drawdown, card purchasing, and receiving payments to account all of which carry a material dependency on Bottomline Technologies, a financial technology provider engaged since February 2015 for payment screening, payment services, and treasury-related solutions. The relationship with Bottomline Technologies represented a material outsourcing arrangement under PRA SS2/21 and FCA SYSC. The bank's third-party and outsourcing programme had experienced delays in delivering the annual programme of framework activities, including the development of a structured, evidence-generating exit plan for its most critical payment technology supplier. The gap between the regulatory requirement and the bank's documented readiness position was material: no formal stressed exit plan existed for Bottomline Technologies, and no monitoring framework had been established to detect early indicators of supplier distress or failure. The bank's Head of Resilience and Risk identified that the absence of a credible, structured exit plan represented a direct supervisory risk. The PRA's expectations under SS2/21 are explicit firms must be able to demonstrate that they can execute an orderly exit from a material outsourcing arrangement and, critically, that they have identified and tested their readiness to manage a stressed exit where normal transition timelines cannot be assumed. FourthLine was engaged to assess the relationship, identify the scenarios that could trigger a stressed exit, and produce a regulator-ready exit plan that the bank's senior management and SMF24 holder could stand behind.