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The UK’s financial regulators have announced new measures for overseeing third-party technology providers that are critical to the financial sector. The move by the Financial Conduct Authority (FCA) and the Bank of England (BoE) addresses growing concerns over financial firms’ heavy reliance on a small pool of technology providers. Although these providers can enhance sector competitiveness, disruptions—whether due to cyber-attacks, natural disasters, or power outages—pose risks to a wide range of consumers and could destabilize the UK’s financial system.
Under the new rules, technology providers deemed “Critical Third Parties” (CTPs) will fall under the partial oversight of the FCA and BoE. HM Treasury will play a key role in designating a service provider as a CTP if it determines that disruptions to the provider’s services could compromise financial stability or public confidence in the financial system. However, regulatory oversight will apply specifically to the services that CTPs provide to financial institutions, not to the entire organization.
Once designated as CTPs, major tech firms will be required to provide ongoing assurances to the financial regulators, participate in resilience testing, and conduct scenario-based exercises to assess and strengthen their operational stability. They will also be required to promptly report significant incidents, including cyber-attacks and infrastructure failures.
The FCA emphasized that these new regulations do not diminish the responsibility of financial firms themselves. Financial institutions and Financial Market Infrastructures (FMIs) remain accountable for ensuring their resilience and for managing risks associated with third-party relationships, in alignment with existing rules on outsourcing and operational resilience.
These regulations aim to create a collaborative oversight approach, strengthening the operational continuity of the UK’s financial sector in the face of potential disruptions to critical technology services.
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