Bank of England issues three consultation papers

Last Thursday the Bank of England published three consultation papers around outsourcing and third party risk management in relation to Financial Market Infrastructures. The papers set out supervisory statements for central counterparties, central securities depositaries, and recognised payment systems operators and specified service providers.

Although these statements are not binding, they will provide guidance to the relevant entities on how the Bank of England will assess compliance with the regulatory framework around outsourcing and its expectations on the relationship between these entities and third parties who carry out the outsourced functions. The aim of these supervisory statements is to facilitate adoption of cloud and similar technologies in response to the Bank of England’s Future of Finance report. It is expected that once the proposals have been accepted, the Bank of England will add an outsourcing and third party risk management part to its code of practice relating to the relevant entities.

The proposals apply to all forms of outsourcing, although they address issues that are of increased relevance to cloud outsourcing such as data security or business continuity, and apply to both outsourced and non-outsourced third party arrangements. The proposals include: defining critical outsourcing arrangements and critical third party arrangements; requiring entities to identify important business services and document the necessary people to carry out those services; and requiring enhanced record-keeping of outsourcings and third party arrangements.

The consultation process closes on 14 July 2022 and you can see the three consultation papers as well as details of how to comment on these proposals here.

We will shortly be publishing on article setting out an overview of the consultation process and proposals but in the meantime please let us know if you have any questions or would like to discuss.