UK Financial Regulators Introduce New Rules For Tech Providers
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UK financial regulators have announced new rules to ensure that technology services provided to financial firms are strong and more reliable. According to the update, regulators are concerned that financial companies now depend heavily on just a few big tech firms.
This reliance could harm the entire financial system if one of these key tech providers experiences a failure. For example, a cyber-attack or power outage at one of these providers could cause trouble for many companies using the same service from the affected firm.
UK Financial Regulators Aim To Strengthen Oversight Of Key Tech Providers
In 2023, the UK government gave regulators extra power to manage these risks. Now, the Financial Conduct Authority (FCA), Bank of England, and Prudential Regulation Authority have shared their plan to use these powers.
The UK watchdogs discussed with several stakeholders in the industry and said these new rules are similar to international standards, like the EU’s Digital Operational Resilience Act.
Under the new rules, certain tech providers who are very important to financial firms, called “Critical Third Parties” (CTPs), will be partly managed by the FCA and Bank of England. HM Treasury will decide if a provider is a CTP by checking if problems with its services could shake the UK’s financial system.
Once named a CTP, these tech providers won’t be fully controlled by regulators, but the services they give to financial firms will be watched closely.
Big Tech firms will need to provide regular updates and details to regulators about the services they offer. They must also test the strength of their systems and run practice scenarios. Additionally, they will be required to report any major issues, such as cyber-attacks or natural events.
UK Financial Regulators Want To Boost Market Transparency And Resilience
The FCA stated that these rules don’t reduce the responsibility of financial firms to stay prepared for any disruptions. Firms must also manage their third-party partners effectively, in line with the current rules on outsourcing and resilience.
Recently, the FCA also shared plans to help bond and derivative investors get more information. It aims to reduce costs for firms by making investment research payments easier.
The FCA has created a simpler, quicker way for post-trade transparency, protecting liquidity providers and cutting compliance costs for investment firms and trading platforms.
The FCA is working to improve post-trade data quality to help build a UK bond data system, so investors get better, quicker information at a fair price.
Jon Relleen, FCA’s director of supervision, policy, and competition, said that giving investors more data and making research easier for firms will help UK markets. These new rules will only take effect after December 1, 2025, according to the regulator.
