‘Critical’ third-parties next in line for UK Fintech regulation
As financial services firms continue to rely on technology and third-party service providers, companies which may not have come under regulatory scrutiny before are now going to potentially fall under the banner of a regulated entity.
The Bank of England (BoE), Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) recently announced that ‘critical’ third parties in the UK could face regulation.
‘Critical’ third parties provide critical functions and services to firms regulated by the FCA and PRA. They can include cloud-based computing services, data analytics firms, FinTechs and other technology companies. Failure or disruption of these ‘critical’ third party firms could be a threat to the stability, or confidence in, the UK financial system.
With the latest announcement, regulators will have the power to conduct investigations and gather relevant information from these firms. For instance, they will be able to appoint ‘skilled persons’ into specific parts of the company’s business, as well as investigators to look into potential breaches of requirements under the legislation.
This is a momentous change to regulatory oversight in the UK, which is a testament to how important technology and FinTech have become to financial infrastructure. The decision will have implications for many other countries regarding the use of technology within the global financial services eco-system.
‘Critical’ third parties will also need to consider the risk exposure they might now be facing from regulatory oversight and make sure they have satisfactory controls and procedures in place. As the FinTech market continues to evolve, businesses should stay ahead of the latest regulatory environment and key exposures they may face.
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